nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2014‒06‒14
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Consumer benefits from the EU Digital Single Market: evidence from household appliances markets By Nestor Duch-Brown; Bertin Martens
  2. Invention in energy technologies: Comparing energy efficiency and renewable energy inventions at the firm level By Rexhäuser, Sascha; Löschel, Andreas
  3. Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers By Alfonso R. Sánchez; J. Ignacio García-Pérez; Sergi Jiménez-Martín
  4. Early retirement and post retirement health By Hallberg, Daniel; Johansson, Per; Josephson, Malin
  5. Are Public Sector Workers Different? Cross-European Evidence from Elderly Workers and Retirees By Tonin, Mirco; Vlassopoulos, Michael
  6. Cross-Sectors Skill Intensity, Productivity and Temporary Employment By Lisi, Domenico; Malo, Miguel
  7. Relatedness in eco-technological development in European regions By Martijn van den Berge; Anet Weterings
  8. Employment Effects of the EU Temporary and Agency Workers Directive in Sweden By Westéus, Morgan
  9. Reduction of income inequality and subjective well-being in Europe By Hajdu, Tamás; Hajdu, Gábor
  10. The impact of innovation support programmes on SME innovation in traditional manufacturing industries: an evaluation for seven EU regions By Radicic D.; Pugh G.; Hollanders H.J.G.M.; Wintjes R.J.M.
  11. Beyond product innovation; improving innovation policy support for SMEs in traditional industries By Wintjes R.J.M.; Douglas D.; Fairburn J.; Hollanders H.J.G.M.; Pugh G.
  12. Young Adults in the Swedish Temporary Agency Sector: Implications of Family Experience By Westéus, Morgan; Lindgren, Urban
  13. Determinants of congestion pricing acceptability By Hamilton, Carl J.; Eliasson, Jonas; Brundell-Freij, Karin; Raux, Charles; Souche, Stephanie; Kiiskilää, Kati; Tervonen, Juha
  14. Gender Differences in Sorting By Merlino, Luca Paolo; Parrotta, Pierpaolo; Pozzoli, Dario
  15. Do occupational demands explain the educational gradient in health? By Meyer S.C.; Künn-Nelen A.C.
  16. What Makes Cities More Productive? Evidence on the Role of Urban Governance from Five OECD Countries By Rudiger Ahrend; Emily Farchy; Ioannis Kaplanis; Alexander C. Lembcke
  17. Maternity leave and its consequences for subsequent careers in Germany By Franz, Nele
  18. Why has inequality in Germany not risen further after 2005? By Miriam Rehm; Kai Daniel Schmid; Dieter Wang
  19. Assessing the impact of introducing an ACE regime: A behavioural corporate microsimulation analysis for Germany By Finke, Katharina; Heckemeyer, Jost H.; Spengel, Christoph
  20. Collateral and Credit Rationing: The role of collateral in explaining and remediating the limited flow of credit to households and SMEs By Helsen, Frederic; Chmelar, Ales

  1. By: Nestor Duch-Brown (European Commission – JRC - IPTS); Bertin Martens (European Commission – JRC - IPTS)
    Abstract: This paper investigates price differences between online and offline retail channels in the EU Digital Single Market. Using price and sales data for ten different product categories sold both offline and online in 21 EU countries in 2009, and correcting for product characteristics, we find evidence that confirms the theory: online prices are lower than offline prices, price dispersion also tends to be lower online and online demand is more price-elastic than offline demand. In addition, from our demand estimates we compute the consumers' welfare effects of different scenarios. Our results indicate that a full price convergence across EU member states towards the lowest observed average price would significantly benefit consumers. Moreover, eliminating e-commerce would reduce consumer surplus in €34 billion while an increase in online sales between 10% and 25% would represent a change in consumer welfare in the range of €3.4 billion to €13 billion.
    Keywords: price dispersion; e-commerce; consumer welfare
    JEL: L11 L15 L68
    Date: 2014–06
  2. By: Rexhäuser, Sascha; Löschel, Andreas
    Abstract: Many countries, especially in Europe, have ambitious goals to transform their national energy systems towards renewable energies. Technological change in both renewable production and efficient use of energy can help to make these targets come true. Using a panel of German firms linked to the PATSTAT patent data, we study invention in both types of energy technologies and how their inventors differ in terms of central firm-specific characteristics. More importantly, we study the relation between conventional (i.e. non-energy) invention and energy invention within the firms. The results from dynamic count data models point to a stimulating effect of conventional inventions for energy efficiency technologies but have no effect on inventions in renewable energies. --
    Keywords: innovation,invention,renewable energy,energy efficiency,dynamic count data
    Date: 2014
  3. By: Alfonso R. Sánchez; J. Ignacio García-Pérez; Sergi Jiménez-Martín
    Abstract: In this paper, we explore the links between pension reform, early retirement, and the use of unemployment as an alternative pathway to retirement. We use a dynamic rational expectations model to analyze the search and retirement behaviour of employed and unemployed workers aged 50 or over. The model is calibrated to reproduce the main reemployment and retirement patterns observed between 2002 and 2008 in Spain. It is subsequently used to analyze the effects of the 2011 pension reform in Spain, characterized by two-year delays in both the early and the normal retirement ages. We find that this reform generates large increases in labour supply and sizable cuts in pension costs, but these are achieved at the expense of very large welfare losses, especially among unemployed workers. As an alternative, we propose leaving the early retirement age unchanged, but penalizing the minimum pension (reducing its generosity in parallel to the cuts imposed on individual pension benefits, and making it more actuarially fair with age). This alternative reform strikes a better balance between individual welfare and labour supply stimulus.
    Date: 2014–05
  4. By: Hallberg, Daniel (Uppsala Center for Labor Studies); Johansson, Per (Uppsala Center for Labor Studies); Josephson, Malin (the Swedish Social Insurance Inspectorate (ISF))
    Abstract: This paper studies empirically the consequences of retirement on health. We make use of a targeted retirement offer to army employees 55 years of age or older. Before the offer was implemented in the Swedish defense, the normal retirement age was 60 years of age. Estimating the effect of the offer on individuals’ health within the age range 56-70, we find support for a reduction in both mortality and in inpatient care as a consequence of the early retirement offer. Increasing the mandatory retirement age may thus not only have positive government income effects but also negative effects on increasing government health care expenditures
    Keywords: Health; mortality; inpatient care; retirement; health care; pensions; occupational pensions
    JEL: I18 J22 J26
    Date: 2014–06–04
  5. By: Tonin, Mirco (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: The public sector employs a large share of the labor force to execute important functions (e.g. regulation and public good provision) in an environment beset by severe agency problems. Attracting workers who are motivated to serve the public interest is important to mitigate these problems. We investigate whether public and private sector employees differ in terms of their public service motivation, as measured by their propensity to volunteer, using a representative sample of elderly workers from 12 European countries. To overcome potential identification difficulties related to unobservable differences in working conditions (e.g. working time, required effort, job security, career incentives), we also look at retired workers. We find that public sector workers, both those currently employed and those already retired, are significantly more prosocial; however, the difference in prosociality is explained by differences in the composition of the workforce across the two sectors, in terms of (former) workers' education and occupation. Looking across industries and within occupations, we find that former public sector workers in education are more motivated, while there are no differences across the two sectors when considering broad occupational categories. We also investigate other dimensions and find no differences in terms of trust, while there is evidence of some differences in risk aversion, political preferences, life and job satisfaction.
    Keywords: public sector, public service motivation, risk aversion, trust, life satisfaction, volunteering
    JEL: D64 H83 J45
    Date: 2014–06
  6. By: Lisi, Domenico; Malo, Miguel
    Abstract: In this article, we study the impact of temporary employment (TE) on productivity and, in particular, we wonder if it differs according to sectors skill intensity. Our data set is an ad-hoc industry-level panel of European countries, which allows to deal with endogeneity problems. Our main result is that TE has a negative impact on productivity, but it is more damaging in skilled sectors. While an increase of 10 percentage points of the share of TE in skilled sectors decrease labour productivity growth about 1-1.5%, in unskilled sectors the decrease would be 0.5-0.8%. This result is robust to changes in the skill intensity index and in the sample composition. We also discuss policy implications of this result for labour market regulation.
    Keywords: Labour productivity, Temporary employment, Skill intensity, Differential effect.
    JEL: J24 J41 O47
    Date: 2014–06–05
  7. By: Martijn van den Berge; Anet Weterings
    Abstract: Within the smart specialisation programme, the European Commission urges regional policy-makers to assess their regional innovation potential and consider investing in the areas of eco-technologies taking into account the regions’ specific strengths and weaknesses. In evolutionary economic geography, several studies have shown that regional innovation is a path dependent process whereby new technologies develop out of the existing regional knowledge base. In this paper, we examine to what extent this is also the case for eco-innovation; if so, the existing technological structure of a region would be an important source of information for regional policymakers with respect to designing their eco-innovation policy agenda. Our results show that in EU-regions both the probability of developing eco-innovations and the number of patents in this field depends on the patents that have been developed in related fields in the region in prior years.
    Keywords: relatedness, technology space, regional branching, eco-technologies, EU
    JEL: C23 R11 Q55
    Date: 2014–06
  8. By: Westéus, Morgan (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper analyses possible effects on total employment, and the distribution between agency work and regular contracts as a consequence of the implementation of the EU Temporary and Agency Workers Directive in Sweden in a dual labour market Mortensen-Pissarides search model. The directive states that the agency worker compensation must be equal to the compensation for similar work at the client firm, and that all parties should actively facilitate the transition from agency employment to employment directly at the firm. The results suggest an overall negative net effect on total employment, but also that an increased transition into regular employment from the agency sector could help to offset this effect.
    Keywords: Labour law; EU directive implementation; temporary agency work; unemployment
    JEL: E24 J21 J42 J48 J64 K31
    Date: 2014–06–11
  9. By: Hajdu, Tamás; Hajdu, Gábor
    Abstract: Using four waves of the European Social Survey (179,273 individuals from 29 countries) the authors analyze the association of reduction of income inequality (redistribution) with subjective wellbeing. Their results provide evidence that people in Europe are negatively affected by income inequality, whereas reduction of inequality has a positive effect on well-being. Since the authors simultaneously estimate the effects of income inequality and its reduction, their results indicate that not only the outcome (inequality), but also the procedure (redistribution) that leads to the outcome influences subjective well-being. The authors argue that living in a country where taxes and transfers reduce income inequality to a greater extent, the poor may feel more protected, and the rich may also feel more generous, which may result in an emotional benefit for them. It is also possible that well-being is associated not only with actual, but also with perceived inequality. The positive effect of redistribution seems to be stronger for less affluent members of the societies and left-wing oriented individuals. The estimations are different in Eastern and Western Europe: In post-communist countries people appear to be harder hit by inequality, whereas the impact of inequality reduction on well-being is higher in the East than in the West. --
    Keywords: subjective well-being,satisfaction,inequality,redistribution,inequality reduction
    JEL: D63 I31
    Date: 2014
  10. By: Radicic D.; Pugh G.; Hollanders H.J.G.M.; Wintjes R.J.M. (UNU-MERIT)
    Abstract: This study investigates the impact of innovation support programmes on SME innovation in traditional manufacturing industries in seven EU regions. Recent literature identifying sources of potential government failure in innovation policy suggests that the effects of public support measures to increase private innovation may be disappointing. Our results are consistent with this hypothesis, yet also suggest a direction for policy reform to overcome government failure and, thereby, to increase the potential additionality of innovation support programmes. Innovation support programmes in the EU typically adopt a cream skimming selection strategy namely, programme managers systematically select firms on the basis of observable characteristics conducive to innovation. The econometric analysis of a new survey database reported in this paper suggests that cream skimming leads to firms being selected for programme participation that benefit less than would randomly selected firms. The policy corollary is that, subject to due diligence checking, allocation of innovation support by lottery should give rise to greater programme additionality than does the prevalent cream skimming approach. We conclude with some practical guidelines for allocation by lottery, which were developed for a recently launched innovation support programme for SMEs. Key words innovation; SMEs; traditional manufacturing industry; public innovation support; government failure; evaluation
    Keywords: Semiparametric and Nonparametric Methods: General; Multiple or Simultaneous Equation Models: Truncated and Censored Models; Switching Regression Models; Management of Technological Innovation and R&D; Technological Change: Government Policy;
    JEL: O32 O38 C14 C34
    Date: 2014
  11. By: Wintjes R.J.M.; Douglas D.; Fairburn J.; Hollanders H.J.G.M.; Pugh G. (UNU-MERIT)
    Abstract: Innovation support measures in the EU are mostly designed to support product innovation in RD intensive sectors. To increase the still considerable contribution to regional employment and competitiveness from SMEs in traditional manufacturing industries a broader innovation policy mix is more appropriate. This paper draws data from a survey of more than 300 SMEs from seven regions within the European Union, as well as case studies, to address the question How can innovation policy interventions be improved to support SMEs in traditional manufacturing industries more effectively We claim that innovation support should be sensitive to the way SMEs in traditional manufacturing sectors innovate and grow. We find that product innovation and support used for product innovation is less likely to generate growth, than support used for process innovation. Also support used for marketing innovations and organizational innovations are of particular importance - together with internationalization, design and cooperation. The increasingly selective application procedures applied are not the most efficient to generate impact, since those who are supported and those who are supported more frequently, are the ones who are most likely to take the same innovative steps anyhow, irrespective of policy support.Keywords Innovation, SMEs, traditional sectors, low-tech, policy evaluation, manufacturing, process innovation
    Keywords: Search; Learning; Information and Knowledge; Communication; Belief; Industry Studies: Manufacturing: General; Industrialization; Manufacturing and Service Industries; Choice of Technology; Innovation and Invention: Processes and Incentives; Management of Technological Innovation and R&D; Technological Change: Choices and Consequences; Diffusion Processes; Technological Change: Government Policy;
    JEL: O38 O33 D83 L60 O14 O31 O32 O33
    Date: 2014
  12. By: Westéus, Morgan (Department of Economics, Umeå School of Business and Economics); Lindgren, Urban (Department of Geography and Economic History)
    Abstract: A person’s first experience of working life is not the individual’s actual first job, but rather the perception conveyed by his or her family and other reference groups. Using Swedish register data on young adults (aged 18–34), and controlling for personal characteristics, we find that individuals with family members or partners with work experience from the temporary agency sector are highly over-represented within that sector. These effects are also found to be among the most influential when determining the relative probability that a person will work in the temporary agency sector.
    Keywords: Temporary work agency; family work experience; young adults; Sweden
    JEL: J12 J42 J82
    Date: 2014–06–11
  13. By: Hamilton, Carl J. (KTH); Eliasson, Jonas (KTH); Brundell-Freij, Karin (WSP); Raux, Charles (Laboratoire d'Economie des Transports, Lyon); Souche, Stephanie (Laboratoire d'Economie des Transports, Lyon); Kiiskilää, Kati (Sito Ltd, Finland); Tervonen, Juha (JT-Con, Finland)
    Abstract: We explore what variables influence public attitudes towards congestion charges using a survey carried out in Stockholm, Helsinki and Lyon, three European cities with many similarities but with different experiences and discourses with respect to congestion charging. We find that self-interest matters in the expected way, with lower support in groups with higher expected payments and lower value of travel time savings. However, self-interest variables only contribute 20-50% to total explained variation in attitudes. The rest is explained by differences in respondents’ attitudes to environment, trust in public agencies, and views about the fairness of pricing policies in general. What issues are associated to congestion charges are similar in all the cities, but the strength of the associations seems to vary depending on how congestion pricing is framed in the specific local discourse. The most important factor seems to be experience of congestion pricing, which increases support substantially.
    Keywords: Congestion charges; Transport pricing; Acceptability; Attitudes
    JEL: H23 H54 R41 R48
    Date: 2014–06–09
  14. By: Merlino, Luca Paolo; Parrotta, Pierpaolo; Pozzoli, Dario (Department of Economics, Copenhagen Business School)
    Abstract: In this paper, we investigate the sorting of workers in firms to understand gender gaps in labor market outcomes. Using Danish employer-employee matched data, we find strong evidence of glass ceilings in certain firms, especially after motherhood, preventing women from climbing the career ladder and causing the most productive female workers to seek better jobs in more female-friendly firms in which they can pursue small career advancements. Nonetheless, gender differences in promotion persist and are found to be similar in all firms when we focus on large career advancements. These results provide evidence of the sticky floor hypothesis, which, together with the costs associated with changing employer, generates persistent gender gaps.
    Keywords: Sorting; Assortative Matching; Gender Gap; Glass Ceiling; Sticky Floor.
    JEL: J16 J24 J62
    Date: 2014–05–19
  15. By: Meyer S.C.; Künn-Nelen A.C. (GSBE)
    Abstract: The aim of this paper is to investigate to what extent occupation-specific demands explain the relationship between education and health. We concentrate on ergonomic, environmental, psychical, social and time demands. Merging the German Microcensus 2009 data with a dataset including detailed occupational demands German Employment Survey 2006, we have a unique dataset to analyze the mediating role of occupational demands in the relationship between education and health status on the one hand and education and health behavior BMI and smoking on the other. We base our analyses on the entire working population and therefore also include those who no longer work, taking occupational demands related to their last job. First, we find that occupational demands are significantly related to subjective health and health behaviors. This holds even stronger for those who are no longer employed. Second, we find that whereas occupational demands do not explain educational differences in subjective health status, they do partially mediate the education gradient in the considered health behaviors. Educational differences in smoking status can partly be explained by ergonomic, environmental, psychical and social demands. The educational gradient in BMI is partly attributable to social occupational demands.
    JEL: I1 I2 J2
    Date: 2014
  16. By: Rudiger Ahrend; Emily Farchy; Ioannis Kaplanis; Alexander C. Lembcke
    Abstract: This paper estimates agglomeration benefits based on city productivity differentials across five OECD countries (Germany, Mexico, Spain, United Kingdom, and United States). It highlights the relationship between cities’ governmental fragmentation and productivity, and represents the first empirical analysis of how metropolitan governance structures affect this relationship. The comparability of results in a multi-country setting is supported through the use of Functional Urban Areas – an internationally harmonised definition of cities based on economic linkages rather than administrative boundaries. In line with the previous literature, the analysis confirms that city productivity tends to increase with city size; doubling city size is found to be associated with an increase in productivity of between two and five percent. What is more, city productivity is positively associated with the population size of nearby cities. On the governance side, the paper finds that cities with fragmented governance structures tend to have lower levels of productivity. For a given population size, a metropolitan area with twice the number of municipalities is associated with around six percent lower productivity; an effect that is mitigated by almost half by the existence of a governance body at the metropolitan level.
    Keywords: productivity, governance, cities, agglomeration economies
    JEL: H73 R12 R23 R50
    Date: 2014–05–16
  17. By: Franz, Nele
    Abstract: Subject of this paper is the investigation of wage developments of women interrupting their careers for giving birth tochildren in comparison to men's wages not facing a parental interruption. We estimate OLS regression models for different subcategories defined by age and point in time. We use data from the German Socioeconomic Panel from 1984 to 2011 to show the importance of legal job protection on reentry wages. Furthermore, we show that wages and the penalty for maternity differs by the duration of interruption as well as in short-, intermediate and long-run perspective. We find less wage penalty for women interrupting their careers within legal protection in the short run, but delayed compensating penalties for the same group in the long run. --
    Keywords: human capital,parental leave,wages,OLS
    JEL: C21 J13 J24 J31
    Date: 2014
  18. By: Miriam Rehm (Chamber of Labour Vienna); Kai Daniel Schmid (Macroeconomic Policy Institute (IMK) Dusseldorf); Dieter Wang (University of Tubingen)
    Abstract: In this paper we explore the reasons for the trend reversal in the development of household market income inequality in Germany in the second half of the 2000s. We analyse to what extent the increasing relevance of capital income as well as the rising share of atypically employed persons have affected the development of income inequality over the last two decades. We use household data from the German Socio-Economic Panel from 1991-2011 and decompose market income into three income sources: (1) household labour income from full-time work, (2) household labour income from atypical work, and (3) household capital income. We apply the factor decomposition method suggested by Shorrocks (1982) to analyse the contribution of these income forms to overall inequality. Our results suggest that changes in the distribution of capital income were a key factor both in the strong increase of inequality in the first half of the 2000s and in the subsequent trend reversal. This finding contrasts with the reasoning that labour market developments were the main cause behind changes in inequality.
    Keywords: Market income inequality, inequality decomposition, SOEP.
    JEL: D31 D33
    Date: 2014–05
  19. By: Finke, Katharina; Heckemeyer, Jost H.; Spengel, Christoph
    Abstract: In their famous Mirrlees review (2011) on reforming the tax system for the 21st century, the authors put forward the introduction of an allowance for corporate equity regime. In recent years, several countries introduced an ACE regime. The main feature of an ACE regime is that it removes tax distortions on marginal investment and finance distortions. Yet, by narrowing the tax base an ACE regime potentially requires an increase in tax rates which might affect location choices and profit shifting activity negatively. In this paper, we employ a microsimulation model to determine the consequences of introducing an ACE regime in Germany. The simulation results show that granting an ACE for corporate income tax purposes results in a revenue loss of about 18%. This could be financed by an increase of the combined profit tax rate by 6 percentage points. At firm level, our analysis illustrates the heterogeneous distribution of the reform effect accross the sample. For 50% of firms between the 25th and 75th percentile, introducing an ACE regime reduces tax payments between 35% and 2%. If the ACE is combined with a tax rate adjustment, the tax effect ranges between -32% and +7.1% for firms between the 25th and 75th percentile. With respect to behavioural responses on decision margins, we find that introducing the ACE reduces the mean debt-ratio by about 1.5 percentage points in the short run. For the capital-stock we arrive at a mean short-term increase of 2.4%. Finally, our computations show that the ACE regime with adjusted profit tax rate cannot be overall tax neutral. In particular, the increase in the profit tax rate required to finance the equity allowance induces intensified outward profit-shifting activities and affects location choices negatively. In the short-run the tax revenue is therefore shown to decline to about 95% of its original level. --
    Keywords: Tax Reform,Allowance for Corporate Equity,Microsimulation,Tax Policy Evaluation
    JEL: H25 H32 K34
    Date: 2014
  20. By: Helsen, Frederic; Chmelar, Ales
    Abstract: European-wide data concerning both companies and households indicate that the credit rationing phenomenon, which has been predicted by theory, does in fact occur to a significant degree in the European credit market. Among SMEs, micro companies are most vulnerable and the current economic crisis has only made these concerns more pressing. Top-down use of the monetary transmission mechanism alone is insufficient to counter the problem. The other solution consists of a bottom-up, microeconomic stimulation of lending transactions, by focusing on collateral and guarantees. The data confirm the high importance that lenders – especially individual households and micro companies – attach to collateral and guarantees when making their lending decisions. As a consequence, we would argue that those parts of the law governing security interests and guarantees should be one of the primary targets for government policy aimed at improving credit flows, especially in avoiding a conflict between consumer protection measures and laws on surety and guarantees. This policy brief firstly aims to give an overview of the problem of credit rationing and to show that low-income households and SMEs are most concerned by the phenomenon. Focusing solely on loans as a way of financing and on the issues related to access to finance by micro and small companies as well households, it then sketches possible solutions focused on guarantees. This paper brings together data from the Eurosystem Household Finance and Consumption survey (HFCS), Eurostat, and both the latest wave of the extended biennial EC/ECB Survey on the access to finance of SMEs (EC/ECB SAFE 2013) and the latest wave of the smaller semi-annual ECB SAFE Survey, covering the period between October 2012 and March 2013.
    Date: 2014–02

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