nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2014‒11‒07
twenty-two papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Baseline results from the EU27 EUROMOD (2009-2013) By Jara Tamayo, Holguer Xavier; Leventi, Chrysa
  2. Does the European country-specific context alter the fatherhood premium? By Anna Baranowska-Rataj; Anna Matysiak
  3. Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Application using Firm Level Patent Data By Joelle Noailly; Roger Smeets
  4. The Complementarities between Information Technologies Use, New Organizational Practices and Employees' Contextual Performance: Evidence from Europe in 2005 and 2010 By Adel Ben Youssef; Ludivine Martin; Nessrine Omrani
  5. Social capital and economic growth in Europe: nonlinear trends and heterogeneous regional effects By Jesús Peiró-Palomino
  6. Addressing the unemployment-mortality conundrum: Non-linearity is the answer By Giorgio Bonamore; Fabrizio Carmignani; Emilio Colombo
  7. The institutional pre-conditions for regional labour market policy making in the EU: Case Studies and Policy Conclusions By Peter Huber
  8. The Labour Supply Effect of Education Maintenance Allowance and its Implications for Parental Altruism By Holford, Angus
  9. Pollution Offshoring and Emission Reductions in European and US Manufacturing By Claire Brunel
  10. Home care, hospitalizations, and doctor visits By Judite Gonçalves; France Weaver
  11. FTR Allocations to Ease Transition to Nodal Pricing: An Application to the German Power System By Friedrich Kunz; Karsten Neuhoff; Juan Rosellón
  12. Exploring flows to tax havens through means of a gravity model: evidence from Italy By Alessia Cassetta; Claudio Pauselli; Lucia Rizzica; Marco Tonello
  13. Is It just a matter of personality? On the role of life satisfaction in childbearing behavior By Marco Le Moglie; Letizia Mencarini; Chiara Rapallini
  14. Illness and Health Satisfaction: The Role of Relative Comparisons By Lars Thiel
  15. Do Firms Benefit from Complementarity Effect in R&D and What Drives their R&D Strategy Choices? By Uwe Cantner; Ivan Savin
  16. Personal Income Tax Reforms and the Elasticity of Reported Income to Marginal Tax Rates: An Empirical Analysis Applied to Spain By Arrazola, María; de Hevia, José; Romero, Desiderio; Sanz-Sanz, José Félix
  17. Assessing the Inequalities of Wealth in Regions: the Italian Case By Roy Cerqueti; Marcel Ausloos
  18. Determinants of the Spanish housing market over three decades and three booms: Long run supply and demand elasticities By Arrazola, María; de Hevia, José; Romero, Desiderio; Sanz-Sanz, José Félix
  19. Residential Property Loans and Bank Performance during Property Price Booms: Evidence from Europe By António Miguel Martins; Ana Paula Serra; Francisco Vitorino Martins; Simon Stevenson
  20. Flexible pay systems and labour productivity: Evidence from Emilia-Romagna manufacturing firms By Davide Antonioli; Paolo Pini; Roberto Antonietti
  21. What Tenants Want: UK occupiers’ requirements when renting commercial property and strategic implications for landlords By Danielle C. Sanderson; Victoria M. Edwards
  22. Does the Home Advantage Depend on Crowd Support? Evidence from Same-Stadium Derbies By Michela Ponzo; Vincenzo Scoppa

  1. By: Jara Tamayo, Holguer Xavier; Leventi, Chrysa
    Abstract: This paper presents baseline results from the latest version of EUROMOD (version G2.1), the tax-benefit microsimulation model for the EU. First, we briefly report the process of updating EUROMOD. We then present indicators for income inequality and risk of poverty using EUROMOD and discuss the main reasons for differences between these and EU-SILC based indicators. We further compare EUROMOD indicators across countries and over time between 2009 and 2013. Finally, we provide estimates of marginal effective tax rates (METR) for all 27 EU countries in order to explore the effect of tax and benefit systems on work incentives at the intensive margin. Throughout we highlight both the potential of EUROMOD as a tool for policy analysis and the caveats that should be borne in mind when using it and interpreting results. This paper updates the work reported in EUROMOD Working Paper EM13/2013.
    Date: 2014–10–17
  2. By: Anna Baranowska-Rataj (Institute of Statistics and Demography, Warsaw School of Economics); Anna Matysiak (Institute of Economy, Warsaw School of Economics)
    Abstract: This paper contributes to the discussion on the effects of childbearing on fathers’ labour market opportunities in Europe. We use instrumental variable models and data from EU-SILC to examine the cross-country variation in the causal effects of family size on the labour market outcomes of fathers. We provide an overview of the impact of family size on the employment careers of fathers, as measured on a range of dimensions: the probability of work, the number of working hours, the job rank and level of pay, and the degree of job stability based on the type of employment contract. Our findings indicate that men increase their number of working hours and earnings in response to having more children, but that the stability of men’s employment contracts does not change. These effects are prevalent across all European countries, but they are somewhat stronger in more conservative societies in which men are expected to be the main breadwinners, and they are weaker in egalitarian societies in which men are expected to participate in household and family duties.
    Keywords: fatherhood, labour market, gender roles
    JEL: J13 J21
    Date: 2014
  3. By: Joelle Noailly; Roger Smeets (The Centre for International Environmental Studies, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper investigates the determinants of directed technical change at the Firm level in the electricity generation sector. We use firm-level data on patents filed in renewable (REN) and fossil fuel (FF) technologies by 5,261 european firms over the period 1978-2006. We investigate how energy prices, market size and knowledge stocks affect firms' incentives to innovate in one technology relative to another and how these factors may thereby induce a shift from FF to REN technology in the electricity generation sector. We separately study small specialized firms, which innovate in only one type of technology during our sample period, and large mixed firms, which innovate in both technologies. We also separate the extensive margin innovation decision (i.e. whether to conduct innovation) from the intensive margin decision (i.e. how much to innovate). Overall, we find that all three factors - energy prices, market sizes and past knowledge stocks - matter to redirect innovation towards REN and away from FF technologies. Yet, we find that these factors have a larger impact on closing the technology gap through the entry (and exit) of small specialized firms, rather than through large mixed firms' innovation. An implication of our results is that firm dynamics are of direct policy interest to induce the replacement of FF by REN technologies in the electricity generation sector.
    Keywords: Directed technical change; Renewable energy; Fossil fuel energy; Patents; Innovation; Firm dynamics
    Date: 2014–02–01
  4. By: Adel Ben Youssef (University of Nice Sophia Antipolis, France; GREDEG CNRS); Ludivine Martin (CEPS/INSTEAD – Luxembourg; CREM-CNRS Université de Rennes 1); Nessrine Omrani (Ecole Polytechnique & ADIS; Université Paris Sud)
    Abstract: This article investigates the relationship between Internet and computer use, new organizational practices and workers’ contextual performance in the European context. Our empirical results are based on data about more than 11,000 employees from 16 European countries in 2005 and more than 16,000 in 2010. First, we find asymmetric effects of IT use. Internet use is, indeed, positively related to all aspects of contextual performance in 2010, while computer use has been positively associated with contextual performance in 2005 but not in 2010. Second, we find that most of the considered new organizational practices have a positive relationship with employees’ contextual performance.
    Keywords: Contextual Performance, Information Technologies, New Organizational Practices, European workers
    JEL: J81 M12 M54 L23
    Date: 2014–10
  5. By: Jesús Peiró-Palomino (Department of Economics, University Jaume I, Castellón, Spain)
    Abstract: After two decades of academic debate on the social capital-growth nexus, discussion still remains open. Most of the literature so far, however, has followed the one-size-its-all approach, neglecting that the great disparities across geographical units might have implications in this relationship. This article analyzes the role of two social capital indicators on the growth of 237 European regions in the period 1995–2007 by implementing a set of both parametric and non- parametric regressions. Whereas the former impose a linear functional form for the parameters, the latter relax this assumption providing a flexible frame in which the functional form is given by the data. The technique also permits introducing parameter heterogeneity in the analysis by estimating individual regional effects. The results from the parametric analysis show that the sign and the magnitude of the effects hinge upon the indicator considered. In contrast, results from the nonparametric regressions suggest that, while both indicators are significant growth predictors, the effect departs from linearity. Moreover, not all regions benefit from social capital with the same intensity. The most notable difference lies in regions from Central and Eastern Europe countries, where social capital is mostly negative. Other regional conditions such as initial income levels, investment rates or the stock of human capital show a more limited influence.
    Keywords: Economic growth, European regions, nonparametric regression, social capital
    JEL: C14 R11 Z13
    Date: 2014
  6. By: Giorgio Bonamore; Fabrizio Carmignani; Emilio Colombo
    Abstract: The effect of unemployment on mortality is the object of a lively literature. However, this literature is characterized by sharply conflicting results. We revisit this issue and suggest that the relationship might be non-linear. We use regional (NUTS 2) data from 23 European countries to estimate a multivariate regression of mortality. The estimating equation allows for a quadratic relationship between unemployment and mortality. We control for various other determinants of mortality at regional and national level and we include region-specific and time-specific fixed effects. The model is also extended to account for the dynamic adjustment of mortality and possible lagged effects of unemployment. We find that the relationship between mortality and unemployment is U shaped. In the benchmark regression, when the unemployment rate is low, at 3%, an increase by one percentage point decreases average mortality by 0.7%. As unemployment increases, the effect decays: when the unemployment rate is 8% (sample average) a further increase by one percentage point decreases average mortality by 0.4%. The effect changes sign, turning from negative to positive, when unemployment is around 17%. When the unemployment rate is 25%, a further increase by one percentage point raises average mortality by 0.4%. Results hold for different causes of death and across different specifications of the estimating equation. We argue that the non-linearity arises because the level of unemployment affects the psychological and behavioural response of individuals to worsening economic conditions.
    Keywords: unemployment, economic crisis, mortality, Europe
    JEL: I15 J64
    Date: 2014–10
  7. By: Peter Huber
    Abstract: Based on questionnaires conducted among PES organizations as well as Pacts and LEIs (Pacts/LEIs) in 40 cities of 12 EU member states and 2 non-EU member states – we take stock of the preconditions for conducting local labour market policies in an urban context in Europe and analyse the development of both regional PES organisations as well as Pacts/LEIs in the time since the economic crisis of 2008. Our findings suggest that the most effective measures to foster partnership based regional labour market approaches in the EU would consist of: a.) Increasing budgetary autonomy of the regional level of labour market policy institutions and aligning their competencies in other fields of labour market policy to the results that are expected from them, b) Investing in the development of partnership based policy institutions such as territorial employment pacts of local employment initiatives both in terms of the number of actors and their structure, d) Increasing the problem solution capabilities of regional actors by providing additional information in terms of evaluation and monitoring results with respect to policy measures and the regional labour market situation. In addition, the European Commission should on the one hand aim to raise awareness among national and regional policy makers on the benefits of decentralisation and devolution for regional labour market policy and to provide know-how and potentially also tools, sufficiently flexible to accommodate for the potentially widely varying needs of different local initiatives, for data generation, monitoring and evaluation. National governments, by contrast, should on the one hand aim to improve the vertical co-ordination of regional labour market policies by using best practice management tools of new public management in PES organisations and take an active role as a partner in Pacts/LEIs. They should also align the vertical distribution of formal competencies for labour market policy making in their respective countries with the tasks of (and the results expected from) regional policy organisations. From the perspective of the regional organisations, in particular this last point seems to be of major importance, since it is also considered to be the most important impediment to effective regional labour market policy making by them.
    Keywords: Academic research, challenges for welfare system, European governance, full employment growth path, good governance, high road strategy, institutional reforms, labour market policy, labour markets, local employment initiatives, multi-level governance, policy options, public employment services, socio-ecological transition, welfare state
    JEL: J68 R23
    Date: 2014–10
  8. By: Holford, Angus
    Abstract: Education Maintenance Allowance (EMA) was a UK government cash transfer paid directly to children aged 16-18 in post-compulsory full-time education. Using data from the Longitudinal Study of Young People in England, we find an EMA payment of £30 per week reduces teenagers’ labour supply by 3 hours per week. We show this is consistent with parents withdrawing cash and in-kind transfers from their child to a value between £7.80 and £20.10 per week. We therefore argue that making this cash transfer directly to the child produces higher child welfare than if the equivalent transfer were made to parents.
    Date: 2014–10–17
  9. By: Claire Brunel (Department of Economics, Georgetown University)
    Abstract: Between 1995 and 2008, the European Union and the United States raised environmental standards and concurrently experienced important reductions in emissions from manufacturing despite a rise in output. Levinson (2009) finds that the offshoring of polluting industries to countries with lower environmental standards played only small role in the cleanup of US manufacturing, which was largely due to improvements in production technique. But there is no evidence of whether US patterns hold in other developed economies. I provide the first analysis of the pollution intensity of EU production and imports to examine which forces drove the EU cleanup. I find that concerns about the effect of pollution offshoring were unfounded in the European Union, not because the effect was small like in the United States, but because the patterns of specialization of EU production and imports were actually exactly opposite to what pollution offshoring would predict. Starting in the early 2000s, EU manufacturing increasingly produced more pollution-intensive goods while imports became progressively less pollution- intensive, especially from low-income countries. The "brown" specialization of EU production is difficult to explain, but about a quarter can be matched by increased demand for EU exports of polluting goods. However, similar to the US cleanup, changes in production and imports were overwhelmed by improvements in production technique, which were the main drivers of the cleanup of manufacturing.
    Keywords: Trade and environment, Environmental account and accounting, Technological innovation, Input output table
    JEL: D57 F18 Q55 Q56
    Date: 2014–01–01
  10. By: Judite Gonçalves; France Weaver
    Abstract: This study estimates the effects of formal home care on hospitalizations and doctor visits. We compare the effects of medically- and non-medically-related home care and investigate heterogeneous effects by age group and informal care availability. Two-part models are estimated, using data from Switzerland. In this federal country, home care policy is decentralized into cantons (i.e. states). The endogeneity of home care is addressed by using instrumental variables, canton and time fixed effects. We instrument canton-level home care use with home care prices and education expenditures. While medically-related home care reduces length of stay below 60 days, non-medically-related home care increases stays beyond 10 days. Non-medically-related home care also reduces the number of GP visits. However, all these effects are small. Both types of home care tend to have stronger effects among the 65+ and those with informal care available in their household.
    Keywords: Home care; Hospitalizations; Doctor visits; Instrumental variables
    Date: 2014–09
  11. By: Friedrich Kunz; Karsten Neuhoff; Juan Rosellón
    Abstract: A shift from zonal pricing to smaller zones and nodal pricing improves efficiency and security of system operation. Resulting price changes do however also shift profits and surplus between and across generation and load. As individual actorscan lose, they might oppose any reform. We explore how free allocation of financial transmission rights to generation and load can be used to mitigate the distributional impact. In a three node network we explore the fundamental effects with regard to reference node/hub for FTRs, the share of FTRs to be allocated for free and the metric to determine the proportion of rights allocated to different generation and load. We test the results in a more realistic setting based on hourly modelling of the German power system at nodal representation.
    Keywords: Electricity market, financial transmission right, congestion management, market design, Germany
    JEL: L52 L94 Q40
    Date: 2014
  12. By: Alessia Cassetta (Bank of Italy); Claudio Pauselli (Bank of Italy); Lucia Rizzica (Bank of Italy); Marco Tonello (Bank of Italy)
    Abstract: We exploit a gravity model to study the main determinants of cross-border financial flows and to identify those flows that appear to be abnormally above the predicted value. Our data include all Italian cross-border bank transfers that took place between 2007 and 2010. We find that, other things being equal, financial flows to risky destinations are 36 per cent larger than in other countries. Using the residuals from our main econometric specification, we then construct an index of anomaly and find positive and statistically significant correlations between this and the rate of property and drugs-related crimes in the province of origin, and also between the index and other measures of foreign jurisdictionsÂ’ riskiness and opacity of legislation.
    Keywords: offshore financial flows; money laundering; regulation
    JEL: K33 G15 F36
    Date: 2014–09
  13. By: Marco Le Moglie; Letizia Mencarini; Chiara Rapallini (Dipartimento di Scienze per l'Economia e l'Impresa)
    Abstract: This paper analyses the role of individual subjective wellbeing (SWB) in conjunction with personality traits (PTs) in childbearing behavior. We use the German Socio Economic Panel to estimate the way satisfaction matters for having a child. We find that SWB positively predicts childbearing, with the effect significant for both genders only for the second child. By controlling that this is not caused by PTs either on SWB or fertility, we assure that the effect of SWB on fertility is not determined by PTs, therefore leaving room for adequate policy measures aimed at raising SWB, which in turn would sustain fertility.
    Keywords: Subjective well-being, fertility by parity, personality traits, GSOEP survey
    Date: 2014
  14. By: Lars Thiel
    Abstract: This paper investigates the role of relative comparisons in health status for individual health satisfaction. Previous research stresses the importance of interdependencies in subjective well-being and health arising from positional preferences and status e ects, social health norms, and comparison processes. Using representative longitudinal data from a German population survey, we estimate empirical health satisfaction models that take these interrelations into account. We find that positional preferences and social status effects in the context of health are rather unimportant for individual health satisfaction. Furthermore, higher levels of reference-group illness can temporarily alleviate the adverse impact of one's own illness on health satisfaction. This is also the first study to show the relevance of health-related upward and downward comparisons for health perception in the general population. The results suggest that upward comparisons are more important than downward comparisons and that becoming sicker than the reference group worsens health satisfaction.
    Keywords: Health satisfaction, physical illness, social status, social norms, social comparisons
    JEL: D03 I10
    Date: 2014
  15. By: Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Ivan Savin (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: This paper analyzes whether firms conducting internal R&D and acquiring external high-tech equipment experience a complementarity effect. For German CIS data we conduct a complete set of indirect and direct complementarity tests refining the analysis by looking at various types of innovations and industries. Complementary effects are found in the indirect but not so in the direct approach. In contrast to previous literature, we find the distinct R&D strategy choices to be significant drivers of innovative activity and we identify contextual variables explaining the joint occurrence of the two strategies.
    Keywords: complementarity, equipment with embodied technology, innovation, internal R&D, Pavitt's sectoral taxonomy
    JEL: O14 O31 O32 O33
    Date: 2014–10–06
  16. By: Arrazola, María; de Hevia, José; Romero, Desiderio; Sanz-Sanz, José Félix
    Abstract: This paper shows the utility of the elasticity of reported income to assess tax reforms in detail from the perspectives of tax revenue and well-being. We provide evidence of the value of the elasticity of reported income in Spain given the variations in marginal rates of the Personal Income Tax. The mean value of this parameter for the entire Spanish territory is 1,541. Nevertheless, we confirm the existence of considerable heterogeneity in the value of this elasticity depending on taxpayers’ characteristics. Based on these estimated elasticities, we make a detailed assessment of the impact of the recent increase in marginal tax rates that Spain approved in 2012.
    Keywords: Personal income tax, Taxable income elasticity, Excess burden, Tax inefficiency,
    Date: 2014
  17. By: Roy Cerqueti; Marcel Ausloos
    Abstract: This paper discusses region wealth size distributions, through their member cities aggregated tax income. As an illustration, the official data of the Italian Ministry of Economics and Finance has been considered, for all Italian municipalities, over the period 2007-2011. Yearly data of the aggregated tax income is transformed into a few indicators: the Gini, Theil, and Herfindahl-Hirschman indices. On one hand, the relative interest of each index is discussed. On the other hand, numerical results confirm that Italy is divided into very different regional realities, a few which are specifically outlined. This shows the interest of transforming data in an adequate manner and of comparing such indices.
    Date: 2014–10
  18. By: Arrazola, María; de Hevia, José; Romero, Desiderio; Sanz-Sanz, José Félix
    Abstract: This paper offers a quantitative analysis of housing supply and demand in Spain. To this end, it formulates a model in line with the traditional models of the literature. Using Spanish data for the period 1975 to 2009, reduced form and structural models are estimated. The results obtained show that faced with situations of disequilibrium prices adjust more rapidly than stock. Similarly, they demonstrate that demand shows low sensitivity to variations in prices and real interest rates. By contrast, it is highly sensitive to demographic changes and the evolution of the labor market. The evidence confirms that permanent income has greater weight than prices as a determinant of demand. Moreover, supply is very sensitive to variations in prices and interest rates.
    Keywords: Housing booms, Demand, Supply, Elasticities, Spain,
    Date: 2014
  19. By: António Miguel Martins (CIICESI, Escola Superior de Tecnologia e Gestão de Felgueiras, Instituto Politécnico do Porto); Ana Paula Serra (CEF.UP and Universidade do Porto); Francisco Vitorino Martins (FEP, Universidade do Porto); Simon Stevenson (School of Real Estate & Planning, Henley Business School, University of Reading)
    Abstract: Understanding the performance of banks is of the utmost importance due to the impact the sector may have on economic growth and financial stability. Residential mortgage loans constitute a large proportion of the portfolio of many banks and are one of the key assets in the determination of their performance. Using a dynamic panel model, we analyse the impact of residential mortgage loans on bank profitability and risk, based on a sample of 555 banks in the European Union (EU-15), over the period from 1995 to 2008. We find that an increase in residential mortgage loans seems to improve bank’s performance in terms of both profitability and credit risk in good market, pre-financial crisis, conditions. These findings may aid in explaining why banks rush to lend to property during booms because of the positive effect it has on performance. The results also show that credit risk and profitability are lower during the upturn in the residential property cycle.
    Keywords: Residential Property Prices; Mortgage Loans; Bank Performance; Dynamic Panel Estimation
  20. By: Davide Antonioli; Paolo Pini; Roberto Antonietti
    Abstract: The aim of this paper is to analyse the link between flexible pay systems (FPS) and labour productivity, with a close look at wage premium determinants as elements disclosing specific managerial strategies. The analysis was conducted on a sample of more than 500 manufacturing firms located in the Emilia-Romagna region, Italy. Results show that the adoption of flexible pay schemes is linked to union involvement and organizational changes within the firm, supporting the idea that flexible wages do not constitute merely an economic premium, but a more complex strategy aimed at increasing employees’ flexibility and autonomy. Notwithstanding the positive effects on productivity, the relation with economic performance does not emerge as extremely innovative. On the one hand, it is driven by a traditional form of premiums (PRP) targeted to individual employees and linked to a simple “effort improvement and control†motivation and “ability to pay†of the firm. On the other, it is driven by premiums (PFP) provided ex-ante and aimed at developing employees’ participation and competencies
    Keywords: performance related pay; pay for participation; organizational innovation; industrial relations; labour productivity
    JEL: J24 J33 J51
    Date: 2014–10–08
  21. By: Danielle C. Sanderson (School of Real Estate & Planning, Henley Business School, University of Reading); Victoria M. Edwards (School of Real Estate & Planning, Henley Business School, University of Reading)
    Abstract: Businesses need property in order to generate turnover and profits. If real estate owners are to be able to provide properties and related services that are desirable, it is crucial that they understand tenants’ requirements and preferences. Changes in the way businesses operate might well lead to an overall reduction in space requirements in all sectors. Faced with reductions in demand, landlords will find themselves in an increasingly competitive marketplace for tenants. Of the array of strategies available to landlords, what strategies should they employ for maximum effect? This paper examines what United Kingdom tenants want from commercial property (retail, industrial and office). The first part provides an analysis of data from several hundred interviews with occupiers of commercial properties owned by some of the largest UK real estate investment companies. Results are presented for each of the asset classes separately. The second part compares the findings with previous research and discusses the strategic implications for landlords.
    Date: 2014–03
  22. By: Michela Ponzo (Università di Napoli and CSEF); Vincenzo Scoppa (Università della Calabria)
    Abstract: We investigate to what extent crowd support contributes to the home advantage in soccer, disentangling this effect from other mechanisms such as players’ familiarity with the stadium and travel fatigue. To evaluate the relevance of crowd support in determining home advantage we analyze same-stadium derbies (matches among teams that share the same stadium) in which teams enjoy different levels of support from the crowd – the home team has many more supporters, mainly because of season ticket holders – while teams do not differ in terms of travel fatigue or familiarity with the stadium. Our estimation results suggest the existence of a sizable crowd support’s effect on the home advantage generated both through the influence on referee’s decisions and through the encouragement of players’ performance.
    Keywords: Soccer; Home Advantage; Crowd Support; Social Pressure; Team Performance; Attendance; Travel Fatigue; Stadium Familiarity; Referee Home Bias.
    JEL: D89 L83 D81
    Date: 2014–10–14

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