nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2014‒05‒09
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Husband’s Unemployment and Wife’s Labor Supply – The Added Worker Effect across Europe By Julia Bredtmann; Sebastian Otten; Christian Rulff
  2. Intergenerational Educational Persistence in Europe By Alyssa Schneebaum; Bernhard Rumplmaier; Wilfried Altzinger
  3. Job insecurity, employability, and health: An analysis for Germany across generations By Otterbach, Steffen; Sousa-Poza, Alfonso
  4. Looking back in anger? Retirement and unemployment scarring By Hetschko, Clemens; Knabe, Andreas; Schöb, Ronnie
  5. Do corporate tax cuts reduce international profit shifting By Brandstetter, Laura
  6. “I want creative neighbours”. Do creative service industries spillovers cross regional boundaries? By Rafael Boix Domenech; José Luis Hervás Oliver; Blanca De Miguel Molina
  7. Maternal working hours and the well-being of adolescent children By Silvia Mendolia
  8. Agglomeration of knowledge: A regional economic analysis for the German economy By Krenz, Astrid
  9. The impact of R&D subsidies on firm innovation By Raffaello Bronzini; Paolo Piselli
  10. Too Old To Work, Too Young To Retire? By Andrea Ichino; Guido Schwerdt; Rudolf Winter-Ebmer; Josef Zweimüller
  11. Does housing capital contribute to inequality? A comment on Thomas Piketty’s Capital in the 21st Century By Odran Bonnet; Pierre-Henri Bono; Guillaume Chapelle; Etienne Wasmer
  12. The effect of tax preparation expenses for employees: Evidence from Germany By Blaufus, Kay; Hechtner, Frank; Möhlmann, Axel
  13. Fostering University‐Industry R&D Collaborations in European Union Countries By Cunningham, James; Link, Albert
  14. High-growth firms and innovation: an empirical analysis for Spanish firms By Segarra Blasco, Agustí, 1958-; Teruel, Mercedes
  15. Foreign Owners and Perceived Job Insecurity in Germany: Evidence from Linked Employer-Employee Data By Verena Dill; Uwe Jirjahn
  16. The intergenerational transmission of reading: is a good example the best sermon? By Anna Laura Mancini; Chiara Monfardini; Silvia Pasqua
  17. Micro Data Fusion of Italian Expenditures and Incomes Surveys By Elena Pisano; Simone Tedeschi
  18. Wealth differences across borders and the effect of real estate price dynamics: Evidence from two household surveys By Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
  19. Business incubators in Italy By Marta Auricchio; Marco Cantamessa; Alessandra Colombelli; Roberto Cullino; Andrea Orame; Emilio Paolucci
  20. A tale of an unwanted outcome: transfers and local endowments of trust and cooperation By Antonio Accetturo; Guido de Blasio; Lorenzo Ricci

  1. By: Julia Bredtmann (Department of Economics and Business, Aarhus University, Denmark); Sebastian Otten (Ruhr University Bochum); Christian Rulff (RWI Essen)
    Abstract: This paper investigates the responsiveness of women’s labor supply to their husband’s loss of employment – the so-called added worker effect. While previous empirical literature on this topic mainly concentrates on a single country, we take an explicit internationally comparative perspective and analyze whether the added worker effect varies across the European countries. In doing so, we use longitudinal data from the European Union Statistics on Income and Living Conditions (EU-SILC) covering the period 2004 to 2011. For our pooled sample of 28 European countries, we find evidence for the existence of an added worker effect, both at the extensive and at the intensive margin of labor supply. Women whose husbands become unemployed have a higher probability of entering the labor market and changing from part-time to full-time employment than women whose husbands remain employed. However, our results further reveal that the added worker effect varies over both the business cycle and the different welfare regimes within Europe.
    Keywords: added worker effect, labor supply, unemployment, cross-country analysis
    JEL: J22 J64 J82
    Date: 2014–05–08
  2. By: Alyssa Schneebaum (Department of Economics, Vienna University of Economics and Business); Bernhard Rumplmaier (Department of Economics, Vienna University of Economics and Business); Wilfried Altzinger (Department of Economics, Vienna University of Economics and Business)
    Abstract: Primarily using data from the 2010 European Social Survey, we analyze intergenerational educational persistence in 20 European countries, studying cross-country and cross-cluster differences in intergenerational mobility; the role of gender in determining educational persistence across generations; and changes in the degree of intergenerational persistence over time. We find that persistence is highest in the Southern and Eastern European countries, and lowest in the Nordic countries. While intergenerational persistence in the Nordic and Southern countries has declined over time, it has remained relatively steady in the rest of Europe. Further, we find evidence of differences in intergenerational persistence by gender, with mothers’ education being a stronger determinant of daughters’ (instead of sons’) education and fathers’ education a stronger determinant of the education of their sons. Finally we see that for most clusters differences over time are largely driven by increasing mobility for younger women.
    Keywords: Intergenerational Persistence, Educational Attainment, Educational Welfare States, Europe, Gender
    JEL: J62 I24 I38 D63
    Date: 2014–05
  3. By: Otterbach, Steffen; Sousa-Poza, Alfonso
    Abstract: In this paper, we use 12 waves of the German Socio-Economic Panel to examine the relationship between job insecurity, employability and health-related well-being. Our results indicate that being unemployed has a strong negative effect on life satisfaction and health. They also, however, highlight the fact that this effect is most prominent among individuals over the age of 40. A second observation is that job insecurity is also associated with lower levels of life satisfaction and health, and this association is quite strong. This negative effect of job insecurity is, in many cases, exacerbated by poor employability. --
    Keywords: job insecurity,employment,employability,well-being,health,Germany
    JEL: J21 J22
    Date: 2014
  4. By: Hetschko, Clemens; Knabe, Andreas; Schöb, Ronnie
    Abstract: Previous studies find that past unemployment reduces life satisfaction even after reemployment for non-monetary reasons (unemployment scarring). It is not clear, however, whether this scarring is only caused by employment-related factors, such as worsened working conditions, or increased future uncertainty as regards income and employment. Using German panel data, we identify non-employment-related scarring by examining the transition of unemployed people to retirement as a life event after which employment-related scarring does not matter anymore. We find evidence for non-employment-related non-monetary unemployment scarring for people who were unemployed for the first time in their life directly prior to retirement, but not for people with earlier unemployment experiences. --
    Keywords: unemployment scarring,life satisfaction,retirement
    JEL: I31 J26
    Date: 2014
  5. By: Brandstetter, Laura
    Abstract: This paper analyzes whether a corporate tax cut reduces profit shifting to low-tax countries. I use firm-level data of 2,812 German corporations around the Business Tax Reform in 2008. Applying a difference-in-differences framework with a one-onone matching strategy, which compares earnings of multinational and domestic corporations, I do not find empirical evidence that even a 10 percentage points cut in the business tax rate leads to a reduction of profit shifting activities. --
    Keywords: corporate taxation,international profit shifting
    JEL: F23 H25 H26
    Date: 2014
  6. By: Rafael Boix Domenech; José Luis Hervás Oliver; Blanca De Miguel Molina
    Abstract: The occurrence of creative service industries (CSI) is a strong determinant of differences in wealth amongst European regions. However, it is unknown if the strong effects are limited to occurring within regional boundaries or whether there are spillover effects into neighbouring regions. The purpose of this paper is to assess the existence of CSI spillover effects on the wealth of neighbouring regions. CSI and spillovers are integrated into both an empirical model and an endogenous growth model. Both models are estimated for a sample of 250 regions in the European Union in 2008. We find that most of the effects of CSI take place within regions, although there is also evidence that CSI has indirect spillovers across regions.
    Keywords: creative industries; creative services; regional growth; spatial spillovers; spatial econometrics
    Date: 2014–03
  7. By: Silvia Mendolia (University of Wollongong)
    Abstract: This study investigates how maternal working hours are related to various outcomes in children aged 11–15 using a sample of mothers and adolescents in the British Household Panel Survey. Research that examines the effects of maternal employment on children has been motivated by the rapid increase of female participation rates in the labour market and increased shares of children living in female-headed or single-mother households. The existing literature on this issue is very limited, mostly based on American data, and provides conflicting results. Fixed effects have been used in the present analysis to control for characteristics of children and families that do not vary over time. The results suggest that full-time maternal employment (as opposed to part-time) has little or no effect on the propensity of adolescents to smoke, their life satisfaction, self-esteem, or intention to leave school at 16. These results are stable and consistent across various specifications of the model and different socio-economic status.
    Keywords: maternal working hours; adolescent well-being; children smoking
    JEL: J13 J22 I12
    Date: 2014
  8. By: Krenz, Astrid
    Abstract: We investigate the effects of job-specific knowledge for individual labor earnings of workers in the German economy. The results indicate a positive effect for earnings stemming in particular from high-knowledge in the areas of sales and marketing, computers and electronics, mathematics, biology and law and government. Investigating the geographical concentration of employment reveals, for example, that workers with highknowledge in the field of communication and media are concentrated in just a few places whereas workers with high-knowledge in law and government and administration and management are far more dispersed over the regions. These patterns of geographical localization of employment give evidence for differences in the dissemination of knowledge across peers and customers. --
    Keywords: agglomeration,knowledge,growth,German regional planning units,wages,Heckman selection,Krugman index
    JEL: J31 J61 R11
    Date: 2014
  9. By: Raffaello Bronzini (Bank of Italy); Paolo Piselli (Bank of Italy)
    Abstract: This paper evaluates the impact of an R&D subsidy program implemented in a region of northern Italy on innovation by beneficiary firms. In order to verify whether the subsidies enabled firms to increase patenting activity, we exploit the mechanism used to allot the funds. Since only projects that scored above a certain threshold received the subsidy, we use a sharp regression discontinuity design to compare the number of patent applications, and the probability of submitting one, of subsidized firms with those of unsubsidized firms close to the cut-off. We find that the program had a significant impact on the number of patents, more markedly in the case of smaller firms. Our results show that the program was also successful in increasing the probability of applying for a patent, but only in the case of smaller firms.
    Keywords: research and development, investment incentives, regression discontinuity design, patents
    JEL: R0 H2 L10
    Date: 2014–04
  10. By: Andrea Ichino (Università di Bologna (UNIBO)); Guido Schwerdt (Ifo Institute for Economic Research); Rudolf Winter-Ebmer (University of Linz and Institute for Advances Studies, Vienna); Josef Zweimüller (University of Zurich)
    Abstract: We study whether employment prospects of old and young workers differ after a plant closure. Using Austrian administrative data, we show that old and young workers face similar displacement costs in terms of employment in the long-run, but old workers lose considerably more initially and gain later. We interpret these findings using a search model with retirement as an absorbing state, that we calibrate to match the observed patterns. Our finding is that the dynamics of relative employment losses of old versus young workers after a displacement are mainly explained by different opportunities of transition into retirement. In contrast, differences in layoff rates and job offer arrival rates cannot explain these patterns. Our results support the idea that retirement incentives, more than weak labor demand, are responsible for the low employment rates of older workers.
    Date: 2014–05
  11. By: Odran Bonnet (Sciences Po, LIEPP, Département d'Economie); Pierre-Henri Bono (Sciences Po LIEPP); Guillaume Chapelle (Sciences Po, LIEPP, Département d'Economie); Etienne Wasmer (Département d'économie)
    Abstract: In his book, Capital in the 21st Century,Thomas Piketty highlights the risk of an explosion of wealth inequality because capital is accumulating faster than income in several countries including the US and European countries such as France. Our work challenges the conclusions of the author in three steps. First, the author’s result is based on the rise of only one of the components of capital, namely housing capital,and due to housing prices. In fact, housing prices have risen faster than rent and income in many countries.It is worth noting that “productive” capital, excluding housing, has only risen weakly relative to income over the last few decades. Over the longer run, the “productive” capital/income ratio has not increased at all. Second, rent, not housing prices, should matter for the dynamics of wealth inequality, because rent represents both the actual income of housing capital for landlords and the dwelling costs saved by “owner-occupiers” (people living in their own houses). Logically, to properly measure capital, the value of housing capital must be corrected by measuring it on actual rental price, and not housing prices. Third, when we apply this change, we find that the capital/income ratio is actually stable or only mildly higher in the countries analyzed (France, the US, the UK, and Canada) except for Germany where it rose. These conclusions are exactly opposite to those found by Thomas Piketty. However, this does not mean that housing prices do not contribute to other forms of inequality. When housing prices rise, owners of the housing capital hold a higher value that can be transformed into consumption. It is also more difficult for young adults to become homeowners. Housing incomes of owners however do not necessarily increase which casts serious doubt on Piketty’s conclusion of a potential explosive dynamics of inequality based on these trends.
    Date: 2014–05
  12. By: Blaufus, Kay; Hechtner, Frank; Möhlmann, Axel
    Abstract: Tax preparation firms advertise their services as a way to save taxes. To investigate this subject, we use a panel of German income tax accounting data, consisting of employees and other taxpayers with non-business income, to explore the relationship between expenses for tax preparation and tax liabilities. We find a negative link with expenses exceeding estimated tax savings. Specifically, one additional Euro yields an estimated tax savings of 72 cents in an OLS regression and 24 cents in a fixed-effects regression. This finding indicates that cross-section estimates are upward biased. The magnitude of the effect implies that tax preparation expenses are not worthwhile from a tax saving perspective alone. In consideration of time savings, combined tax and time savings also do not exceed expenses for any income quintile. The result is robust to various alternative specifications such that in no setting do the pecuniary and time savings exceed the tax preparation expenses. Overall, our findings suggest an important benefit of tax preparation expenses beyond tax and time savings. --
    Keywords: response to taxation,tax advisors,tax return preparation,tax preparation expenses
    JEL: H24 H31
    Date: 2014
  13. By: Cunningham, James (National University of Ireland); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: This paper advances our understanding of university-industry research and development (R&D) collaborations. These strategic relationships are a dimension of entrepreneurial activity, and they are thus important drivers of economic growth and development. Business collaboration with universities increases the efficiency and effectiveness of industrial investments. Previous studies have found that universities are more likely to collaborate with industry if the business is mature and large, is engaged in exploratory internal R&D, and there are not major intellectual property (IP) issues between both parties. Businesses gain from such collaborations through increased commercialisation probabilities and economies of technological scope. Based on publicly available data collected by the Science-to-Business Marketing Research Centre of Germany as part of a European Commission project, our paper focuses on two key questions. First, why are there cross-country differences in the extent to which universities collaborate with business in R&D? Second, are there covariates with these differences that might offer insight into policy prescriptions and policy levers for enhancing the extent to which such collaboration takes place? We find that access is positive and statistically significant in relation to fostering university business R&D collaborations. Our results, albeit that they are tempered by a small sample of data, have implications how national innovation systems support further harmonization of IP regimes across universities and how universities priorities its own investments and incentives.
    Keywords: R&D collaborations; entrepreneurship; university-industry partnerships; European Union
    JEL: O31 O32 O33 O38
    Date: 2014–04–28
  14. By: Segarra Blasco, Agustí, 1958-; Teruel, Mercedes
    Abstract: This paper analyses the effect of R&D investment on firm growth. We use an extensive sample of Spanish manufacturing and service firms. The database comprises diverse waves of Spanish Community Innovation Survey and covers the period 2004–2008. First, a probit model corrected for sample selection analyses the role of innovation on the probability of being a high-growth firm (HGF). Second, a quantile regression technique is applied to explore the determinants of firm growth. Our database shows that a small number of firms experience fast growth rates in terms of sales or employees. Our results reveal that R&D investments positively affect the probability of becoming a HGF. However, differences appear between manufacturing and service firms. Finally, when we study the impact of R&D investment on firm growth, quantile estimations show that internal R&D presents a significant positive impact for the upper quantiles, while external R&D shows a significant positive impact up to the median. Keywords : High-growth firms, Firm growth, Innovation activity. JEL Classifications : L11, L25, L26, O30
    Keywords: Empreses -- Creixement, Innovacions tecnològiques, Emprenedoria, Investigació industrial, 33 - Economia,
    Date: 2014
  15. By: Verena Dill; Uwe Jirjahn
    Abstract: Using linked employer-employee data from Germany, we examine the role of foreign owners in employees' perceptions of job insecurity. Our estimates show that there tends to be a positive link between foreign owners and perceived job insecurity. The link is specifically strong for foreign-owned firms with high personnel turnover or poor employment growth. It is also stronger if the foreign-owned firm provides managerial profit sharing. However, the link is negative for foreign-owned firms with product innovations.
    Keywords: Foreign ownership, perceived job insecurity, managerial profit sharing, personnel turnover, product innovation
    JEL: F23 J23 J28 J63
    Date: 2014
  16. By: Anna Laura Mancini (Bank of Italy); Chiara Monfardini (University of Bologna, CHILD and IZA); Silvia Pasqua (University of Turin, CHILD and Collegio Carlo Alberto)
    Abstract: We use the last two waves of the Italian Time Use Survey to analyse the intergenerational transmission of reading habits. This can be explained by both cultural and educational transfers from parents to children and by imitative behaviour. Imitation is of particular interest, since it suggests the direct influence parents can have on a child’s preference and habit formation, and opens the way for active policies promoting good parenting behaviour. We investigate the imitative behaviour of children using a household fixed-effects model, where we identify the impact of the parents’ role by exploiting the different exposure of siblings to parents’ example within the same household. We find robust evidence on the existence of an imitation effect: on the day of the survey children are more likely to read after seeing either the mother or the father reading.
    Keywords: intergenerational transmission of preferences, parental role model, imitation, household fixed effects.
    JEL: J13 J22 J24 C21
    Date: 2014–04
  17. By: Elena Pisano; Simone Tedeschi
    Abstract: The aim of this work is to match household consumption information from Indagine sui Consumi delle Famiglie (Household Budget Survey, HBS) by the Italian National Statistical Institute (ISTAT) with Indagine sui Bilanci delle Famiglie Italiane (Survey of Households’ Income and Wealth, SHIW) by the Bank of Italy for the year 2010. The work offers a review of the main matching methodologies, coupled with a discussion of the underlying hypotheses (such as the CIA) which, in our case, are less demanding to assume given the presence consumption aggregates as common variables between the two surveys. Moreover, some tests measuring the validity of the matching procedure are presented in order to check the preservation of joint distributions. The resulting sample is expected to allow better distributional and micro-econometric analyses on consumption income and wealth (e.g. Engel curves, consumption age/income profiles). Moreover, the very detailed integrated dataset would constitute a platform for an integrated microsimulation analysis of direct, indirect and wealth tax reforms which, so far, has not been feasible taking available sample surveys separately. Our matching achieves a good preservation of the marginal distributions of all consumption aggregates from the donor survey. However, a thorough comparison of the original distributions suggests that the HBS is a convenient donor for the imputation of non-durable commodities only. Consumption aggregates closer to the concept of wealth (such as durables and the extraordinary expenditure for dwelling maintenance) or savings (such as mortgages and private pensions) prove to be better assessed by the longer - and more issue-specific - recall of the SHIW. As secondary outcomes, the information derived from HBS on non-durables entails an increase in the dispersion and an upward adjustment of consumption profiles in the synthetic distribution relative to SHIW. This implies also a downsized average propensity to save for the household sector which gets closer to the National Accounts figures.
    Keywords: data fusion, propensity score, household consumption, income, wealth
    JEL: C81 D12 D31
    Date: 2014–04
  18. By: Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
    Abstract: Crossing borders, be it international or regional, often go together with price, wage or indeed wealth discontinuities. This paper identifies substantial wealth differences between Luxembourg resident households and cross-border commuter households despite their similar incomes. The average (median) net wealth difference is estimated to be EUR 367,000 (EUR129,000) and increases for higher percentiles. Using several different regression and decomposition techniques, spatial (regional) differences in real estate price developments, and thus differences in accumulated nominal capital gains are shown to be one main driving factor for these wealth differences. Other factors contributing to the observed wealth differences are differences in age, income, education and other household characteristics.
    Keywords: household survey, wealth, real estate price dynamics, cross-border commuting
    JEL: D31 J61 F22 R23 R31
    Date: 2014–05
  19. By: Marta Auricchio (Bank of Italy); Marco Cantamessa (Polytechnic of Turin); Alessandra Colombelli (Polytechnic of Turin); Roberto Cullino (Bank of Italy); Andrea Orame (Bank of Italy); Emilio Paolucci (Polytechnic of Turin)
    Abstract: The Italian economy has suffered from structural problems for the last fifteen years, which have weakened its competitiveness. The innovation gap, by international standards, is one of those problems. Business incubators are one of the solutions proposed in the economic literature and put into practice in many countries in order to increase the birth and survival rates of extremely innovative firms. With the help of an empirical survey of a highly representative sample of Italian business incubators and a significant subset of incubated start-ups, this paper draws an institutional and functional map of business incubators in Italy. Italian incubators are mostly small and heavily dependent on public funding. They mainly provide logistical services, less frequently higher value added ones like consulting and networking. According to the firms interviewed, the role played by incubators is on average useful but not essential for the success of the start-up.
    Keywords: innovation, start-up, public policy
    JEL: M13 G28 O31
    Date: 2014–04
  20. By: Antonio Accetturo (Bank of Italy); Guido de Blasio (Bank of Italy); Lorenzo Ricci (ECARES-ULB)
    Abstract: Transfers can do good; however, they can also result in massive failures. This paper presents a model that highlights the ambiguous nature of the impact of transfers on local endowments of social capital. It then describes an empirical investigation that illustrates that the receipt of EU structural funds causes a deterioration of the endowments of trust and cooperation in the subsidized regions.
    Keywords: social capital, political economy, regional transfers
    JEL: R1 D7 Z1
    Date: 2014–04

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