nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒01‒09
twenty papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Adaptation to Poverty in Long-Run Panel Data By Andrew E. Clark; Conchita D'Ambrosio; Simone Ghislandi
  2. Immigration and Crime: New Empirical Evidence from European Victimization Data By Nunziata, Luca
  3. Demographic change and unemployment in East Germany: how close are the ties? By Michaela Fuchs; Antje Weyh
  4. The effects of energy costs on firm re-location decisions By Lucia Lavric; Nick Hanley
  5. Public-private sector wage differentials by type of contract: evidence from Spain By Raúl Ramos; Esteban Sanromá; Hipólito Simón
  6. A new kid in town? Active inclusion in European minimum income schemes By Sarah Marchal; Natascha Van Mechelen
  7. Determinants of technological innovation in SMEs. Firm-level factors, agglomeration economies and the role of KIBS providers By Roberto Ganau; Eleonora Di Maria
  8. Public Housing Magnets: Public Housing Supply and Immigrants' Location Choices By Verdugo, Gregory
  9. Health Status and the Allocation of Time: Cross-Country Evidence from Europe By Gimenez-Nadal, J. Ignacio; Molina, José Alberto
  10. Fuel Poverty is it harmful for health? Evidence from French health survey data By Jusot, Florence; Lacroix, Elie
  11. Patterns of FDI in Southern European Periphery: a Tale of Missing FDI? By Laura Resmini
  12. Cross-border delivery of public services: How useful are EGTCs? By Annika Jaansoo; Nico Groenendijk
  13. The Relationship between Hours of Domestic Services and Female Earnings: Panel Register Data Evidence from a Reform By Halldén, Karin; Stenberg, Anders
  14. Public-private sector wage differentials in Spain. An updated picture in the midst of the Great Recession. By Antón, José-Ignacio; Muñoz de Bustillo, Rafael
  15. Beyond the Average: Peer Heterogeneity and Intergenerational Transmission of Education By Tanika Chakraborty; Olga Nottmeyer; Simone Schüller; Klaus F. Zimmermann
  16. The relationship between earnings and first birth probability among Norwegian men and women 1994-2008 By Rannveig V. Kaldager
  17. Before-after differences in labor market outcomes for participants in medical rehabilitation in Germany By Sebastian Fischer; Inna Petrunyk; Christian Pfeifer; Anita Wiemer
  18. The differential earnings and income effects of involuntary job loss on workers with disabilities By Angelov, Nikolay; Eliason, Marcus
  19. Impact of School Quality on Educational Attainment - Evidence from Finnish High Schools By Heikki Pursiainen; Mika Kortelainen; Jenni Pääkkönen
  20. Maternal Employment, Fertility, Child Care Use, and Cognitive Outcomes of Children: Evidence from a Norwegian Reform By Kai Liu; Marc Chan

  1. By: Andrew E. Clark; Conchita D'Ambrosio; Simone Ghislandi
    Abstract: We consider the link between poverty and subjective well-being, and focus in particular on potential adaptation to poverty. We use panel data on almost 54,000 individuals living in Germany from 1985 to 2012 to show first that life satisfaction falls with both the incidence and intensity of contemporaneous poverty. We then reveal that there is little evidence of adaptation within a poverty spell: poverty starts bad and stays bad in terms of subjective well-being. We cannot identify any cause of poverty entry which explains the overall lack of poverty adaptation.
    Keywords: Income, Poverty, Subjective well-being, Adaptation, SOEP
    JEL: I31 D60
    Date: 2014–11
  2. By: Nunziata, Luca (University of Padova)
    Abstract: We exploit the increase in immigration flows into western European countries that took place in the 2000s to assess whether immigration affects crime victimization and the perception of criminality among European natives. Using data from the European Social Survey, the Labour Force Survey and other sources, we provide a set of fixed effects and instrumental variable estimations that deal with the endogenous sorting of immigration by region and with the sampling error in survey based measures of regional immigration shares, whose implications in terms of attenuation bias are investigated by means of Monte Carlo simulations. Our empirical findings show that an increase in immigration does not affect crime victimization, but it is associated with an increase in the fear of crime, the latter being consistently and positively correlated with the natives' unfavourable attitude toward immigrants. Our results reveal a misconception of the link between immigration and crime among European natives.
    Keywords: crime, migration, victimization, perception, fear
    JEL: J15 J61 K42 F22 R23 O15
    Date: 2014–11
  3. By: Michaela Fuchs; Antje Weyh
    Abstract: In East Germany a profound demographic change has been taking place that manifests itself in the shrinkage and the aging of the population. One major cause is the drop in the East German fertility rates by about half directly after the reunification of Germany in 1990. In no other countries of the former Eastern Bloc, this process was so drastic and abrupt as in East Germany. Around the year 2007, the small after-reunification cohorts started to enter the East German labor market that had been characterized for many years by high unemployment and declining employment. Beginning in 2005, however, the situation on the labor market reversed. At the same time, substantial labor market reforms were started in Germany that have additionally spurred employment. Given these developments, the question arises if and to what extent the labor market entry of the young and smaller cohorts has affected the declining unemployment rate in East Germany. This paper tackles the question of the ties between demography and unemployment in East Germany and to this end draws on the concepts of the cohort crowding literature. Using data from official population and labor-market statistics for the period from 1993 to 2012, we calculate both a direct and an indirect effect of aging on unemployment. For the direct effect we decompose the East German unemployment rate in three components. We find that not changes in the age structure of the population but rather labor-market effects had the greatest impact on the decrease in unemployment. For the econometric analysis of the indirect effect, we use information on the small-scale regional level and resort to spatial panel methods. The results yield a strong relation between the youth as well as the old-age dependency ratio and the unemployment ratio. A decline in the youth dependency ratio of one per cent comes along with a decline of the unemployment ratio of 0.489 per cent. Likewise, an increase of the old-age dependency ratio of one per cent is accompanied by a fall of the unemployment ratio of 0.470 per cent. Overall, our results provide evidence that the declining unemployment rate in East Germany is indeed affected by aging. Thus, a reversed cohort crowding effect has been taking place in the East German labor market.
    Keywords: Demographic change; Unemployment; East Germany; Spatial panel methods;
    JEL: C21 J21 J82 R23
    Date: 2014–11
  4. By: Lucia Lavric (Department of Economics, Duke University); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews)
    Abstract: Energy costs are partly driven by environmental policy choices. In this paper, the effects of variations in energy costs – as measured by end-user electricity prices – on firm relocation decisions are investigated. Using a discrete choice model a nd a data base which has not previously been exploited to study this problem, we investigate the effects of variations in energy costs both for a sub-set of re-locating European firms in terms of which country they move to; and then for a larger set of firms in terms of the decision to re-locate or not in response to higher energy prices. We find that energy costs play a significant role in determining relocation destinations, and that this effect is asymmetric between firms moving into and out of a country , and between high energy intensity and low energy intensity sectors. The findings of the paper have implications for the Pollution Havens Hypothesis, since they show the extent to which the effects of climate policy on domestic energy costs can be expected to impact on firm relocation decisions both into and out of a country.
    Keywords: firm re-location, energy costs, Pollution Havens Hypothesis, climate policy, carbonleakage
    JEL: D22 F18 Q41 Q52
    Date: 2014–08
  5. By: Raúl Ramos (Universitat de Barcelona & AQR-IREA); Esteban Sanromá (Universitat de Barcelona & IEB); Hipólito Simón (Universidadde Alicante & IEI & IEB)
    Abstract: The article examines public-private sector wage differentials in Spain using microdata from the Structure of Earnings Survey (Encuesta de Estructura Salarial). When applying various decomposition techniques, we find that it is important to distinguish by gender and type of contract. Our results also highlight the presence of a positive wage premium for public sector workers that can be partially explained by their better endowment of characteristics, in particular by the characteristics of the establishment where they work. The wage premium is greater for female and fixed-term employees and falls across the wage distribution, being negative for more highly skilled workers.
    Keywords: Public-private sector wage gap, wage distribution, matched employer-employee data, decomposition methods
    JEL: C2 E3 J3 J4
    Date: 2014
  6. By: Sarah Marchal; Natascha Van Mechelen
    Abstract: This paper assesses the current variation in activation strategies directed towards able-bodied persons of working age who rely on a minimum income guarantee in 20 EU Member states. First, we argue that the Active Inclusion notion developed by the European Commission in its 2008 Recommendation on the active inclusion of persons on a large distance of the labour market provides a useful device to categorize current activation strategies towards minimum income protection (MIP) recipients. Next we use this active inclusion concept in a fuzzy set ideal type analysis of purpose-collected institutional data to investigate to what extent current activation strategies reflect the Commission’s concept of active inclusion. We find that there are few countries where the activation discourse has remained a dead letter. Most countries have implemented policy measures that aim to discourage benefit dependency among MIP recipients. Nevertheless, behind the realities of activation strategies towards minimum income recipients seldom lies the notion of active inclusion as defined by the European Commission. Particularly, many countries adopt predominantly negative incentives to increase labour market participation rates, rather than enabling measures. The majority of countries relies heavily on financial and non-financial incentives such as strong reasonable job definitions or severe sanctions for non-compliance with job availability requirements to encourage employment.
    Keywords: activation strategy, fsITA, active inclusion, minimum income schemes, EU social policy
    JEL: I38 J60 J64
    Date: 2014–12
  7. By: Roberto Ganau; Eleonora Di Maria
    Abstract: The study of the determinants of innovation processes has received great attention in both the economics and the business literature. However, only few contributions have proposed a comprehensive framework able to bring together different but not mutually exclusive research approaches. This paper contributes to the analysis of the determinants of technological innovation - namely, product and process innovations - focusing on Italian manufacturing small and medium sized firms (SMEs) by accounting, simultaneously, for firm-specific characteristics, agglomeration economies and the role of KIBS providers. Specifically, the paper provides an empirical investigation which is built on a multi-dimensional theoretical basis which gathers the resource-based view of the firm and the new economic geography framework together. The empirical exercise employs data of about 4,000 Italian SMEs observed over the period 2004-2006 and drawn from the Unicredit-Capitalia database. Parametric probabilistic models are estimated in order to identify the joint effects of several potential determinants of successful technological innovation. Overall, results suggest that technological innovation in manufacturing SMEs is mainly driven by firm-specific characteristics. It emerges that experience and knowledge accumulated over time (i.e. age) as well as availability of human and capital resources (i.e. size) matter for being innovative firms. Moreover, innovative firms show both higher labour productivity levels and higher investments in R&D activities than non-innovative firms. Results partially support previous findings on the agglomeration-innovation relationship: overall, diversification (specialisation) externalities seem to positively (negatively) affect (high-tech) firms' probability of introducing technological innovations. Finally, results suggest that the spatial agglomeration of KIBS providers - i.e. being located in an area characterised by a high concentration of KIBS firms - does not matter per se: in fact, a positive effect emerges only when firms' heterogeneity in absorptive capacity is explicitly considered. Results show that only (low-tech) SMEs which invest in R&D activities benefit from a high geographic concentration of (professional and technological) KIBS firms.
    Keywords: Technological innovation; Manufacturing SMEs; Resource-Based Theory; Agglomeration Economies; KIBS providers; Italy;
    JEL: D22 O31 R12
    Date: 2014–11
  8. By: Verdugo, Gregory (Bank of France)
    Abstract: This paper investigates how a reform allowing immigrants with children in France access to public housing during the 1970s influenced their initial location choices across local labour markets. We find that cities with higher public housing supplies have a large 'magnetic effect' on the location choice. The estimated effect is substantial and quantitatively similar to the effect of the size of the ethnic group in the urban area. In cities with higher public housing supply, these immigrants tend to benefit from better housing conditions, but non-European immigrants are also more likely to be unemployed.
    Keywords: public housing, social housing, immigration, location choice
    JEL: J15 R50
    Date: 2014–11
  9. By: Gimenez-Nadal, J. Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza)
    Abstract: This paper analyzes the relationship between reported health status and time allocation decisions in six European countries. Using the Multinational Time Use Study, we find that a better perception of own health is associated with less time devoted to sleep, personal care, and non-market work, for both men and women, and with less time in leisure for men, while it is associated with more time in market work for both men and women. We also find that the relationship with activities is very similar across countries, and that market work has a relationship of substitution with sleep, personal care, non-market work, and leisure, with mixed evidence for the rest of the uses of time. These findings are consistent with prior results regarding health, market work, and leisure in the US. However, in contrast to the large positive correlation between health and home production in the US, we find a large negative correlation between these activities in the six European countries analyzed. This study represents a first step in understanding cross-country differences in the relationship between health status and time devoted to a range of activities, in contrast with other analyses that have mainly focused only on market work. A better understanding of these cross-country differences may help to identify the effects of public policies on individual uses of time.
    Keywords: health, time allocation, Multinational Time Use Study
    JEL: D13 J16 J22
    Date: 2014–11
  10. By: Jusot, Florence; Lacroix, Elie
    Keywords: France; Health; Fuel poverty;
    JEL: I18
    Date: 2014–12
  11. By: Laura Resmini
    Abstract: This paper examines patterns of FDI inflows to Southern European (SE) regions, which seem to be at the margin of the FDI attraction game accounting for a very small share of total inward FDI in the EU. In order to understand why these regions attracted such a low number of foreign investors, this contribution provides the following analysis: i) an overall picture of the main characteristics of patterns of inward FDI in SE regions at geographical and sectoral level; ii) the factors that drive FDI flows into EU regions; iii) as assessment of the potential of attractiveness of SE regions, both in absolute terms and with respect to other EU regions. The main results indicate that SE regions are definitively less attractive than other EU regions, though a lot of variation does exist at both geographical and sectoral level. In order to improve their capacity to attract FDI SE regions should improve their factors of attractiveness by implementing several structural reforms
    Keywords: foreign direct investment; Southern European periphery; spatial econometrics
    JEL: F23 R12 C21
    Date: 2014–11
  12. By: Annika Jaansoo; Nico Groenendijk
    Abstract: The European Grouping of Territorial Cooperation (EGTC) is a European legal instrument designed to facilitate and promote cross-border, transnational and interregional cooperation. It was introduced in 2006 to enable public authorities of various Member States to team up and deliver joint services, without requiring a prior international agreement to be signed and ratified by national parliaments. At the end of 2013, 45 EGTCs had been established, and 15-20 EGTCs were under consideration (Committee of the Regions, EGTC Monitoring Report 2013). EGTCs in operation differ considerably in terms of size and activities, but some patterns can be discerned: most EGTCs are located in the Southern and Eastern part of the EU, and most deal with strategic cooperation for economic development (including spatial planning) rather than with concrete cross-border public service provision. Recently, EGTCs have been given a more prominent role in the institutional set-up of EU Cohesion Policy for 2014-2020. This all raises the question whether the instrument of EGTC is used for what it was originally intended for. This paper provides such an evaluation and looks at the possibilities and obstacles for cross-border cooperation in general, and in public service provision in particular, within and outside of the EGTC framework.
    Keywords: cross-border cooperation; public services; EGTC JEL-codes:
    JEL: H42 H70 H73 H87 R50
    Date: 2014–11
  13. By: Halldén, Karin (SOFI, Stockholm University); Stenberg, Anders (SOFI, Stockholm University)
    Abstract: In 2007, a tax discount reform in Sweden reduced prices of outsourced domestic services (ODS) by 50 percent. Unlike most previous studies, population register data enable us to directly link a proxy for relaxed time constraints, annual changes in households' tax discounts, to changes in earnings. We find that 60 percent of married women's freed hours are applied to labor market work, which tapers off when ODS corresponds to approximately three weeks of full time work. This is substantially higher than previously reported estimates. A causal interpretation is supported by "placebo tests", and we carefully outline the assumptions required.
    Keywords: household work, outsourcing, female labor supply
    JEL: H2 J13 J22
    Date: 2014–11
  14. By: Antón, José-Ignacio; Muñoz de Bustillo, Rafael
    Abstract: Using the recent Wage Structure Survey 2010, this article examines the public-private sector wage gaps in Spain across the whole earnings distribution and the incidence of the gender gap in both sectors of the economy. Firstly, we find that that there is positive wage premium to public sector employment which is not fully explained by employees’ observable characteristics. Furthermore, this premium concentrates on low-skilled workers, while high-skilled individuals in the public sector suffer a pay penalty. Secondly, the gender gap is substantially larger in the private sector. Lastly, we analyse what happens in some specific activities, Education and Human health and social work, where both public and private sector coexist to a large extent. We discuss several explanations for these findings, coherent with international evidence, and the possible implications of the current process of downsizing of public sector employment associated to austerity measures.
    Keywords: wage gap; public sector; gender gap; quantile regression
    JEL: C21 J16 J31 J45
    Date: 2013–08–06
  15. By: Tanika Chakraborty; Olga Nottmeyer; Simone Schüller; Klaus F. Zimmermann
    Abstract: Estimating the effect of ‘ethnic capital’ on human capital investment decisions is complicated by the endogeneity of location choice of immigrants and the reflection problem. We exploit a rare immigrant settlement policy in Germany to identify the causal impact of parental peer-heterogeneity on the educational outcomes of their children. To identify the direction of peer effect we restrict to no-child-adult-peers who completed their education much before the children in our sample of interest. We find that children of low-educated parents benefit significantly from the presence of high-educated neighbors, with more pronounced effects in more polarized neighborhoods and significant gender heterogeneity. In contrast, we do not find any negative influence coming from the low-educated neighbors. Our estimates are robust to a range of flexible peer definitions. Overall, the findings suggest an increase in parental aspirations as the possible mechanism rather than a direct child-to-child peer effect.
    Keywords: Education, Ethnic Capital, Germany, Immigrant, Peer Effects, Policy Experiment
    JEL: R23 J15 I21
    Date: 2014–12
  16. By: Rannveig V. Kaldager (Statistics Norway)
    Abstract: I analyze whether the correlation between yearly earnings and the first birth probabilities changed in the period 1994-2008 in Norway, applying discrete-time hazard regressions to highly accurate data from population registers. The results show that the correlation between earnings and fertility has become more positive over time for women but is virtually unchanged for men – rendering the correlation fairly similar across sex at the end of the period. Though the (potential) opportunity cost of fathering increases, there is no evidence of a weaker correlation between earnings and first birth probability for men. I suggest that decreasing opportunity costs of motherhood as well as strategic timing of fertility to reduce wage penalties of motherhood are both plausible explanations of the increasingly positive correlation among women.
    Keywords: Fertility; First births; Earnings
    JEL: J11 J13 J16
    Date: 2014–10
  17. By: Sebastian Fischer (Leuphana University Lueneburg, Germany); Inna Petrunyk (Leuphana University Lueneburg, Germany); Christian Pfeifer (Leuphana University Lueneburg, Germany); Anita Wiemer (Leuphana University Lueneburg, Germany)
    Abstract: The authors address the issue of effectiveness of medical rehabilitation in terms of labor market outcomes by analyzing a large representative administrative panel data set for Germany. The research design focuses on socio-demographic group differences in before-after differences in days with unemployment benefits, days in employment, and labor income of participants in medical rehabilitation. The mean before-after differences indicate that medical rehabilitation is rather ineffective with respect to labor market outcomes, because the number of days with unemployment benefits is larger and the number of working days and labor income are smaller after the rehabilitation than before. The differences in the before-after differences are however large between socio-demographic groups. For example, older participants perform significantly worse and better educated participants have significant better labor market outcomes after the rehabilitation than before, whereas gender differences are small.
    Keywords: medical rehabilitation, effectiveness, labor market performance
    JEL: I1 J2
    Date: 2014–12
  18. By: Angelov, Nikolay (IFAU - Institute for Evaluation of Labour Market and Education Policy); Eliason, Marcus (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: People with disabilities, both in Sweden and elsewhere, are consistently found to face considerable difficulties on the labour market. In this study we have investigated the differential impact of involuntary job loss, on earnings and income, if being disabled. Our main findings are that earnings of those with and without disabilities began to diverge already several years prior to job loss because of a much larger incidence of longer periods of absence due to either sickness or rehabilitation. The seemingly permanent earnings differential following job loss seems to have been a consequence of much more of the job losers with disabilities not returning to employment but instead becoming disability retirees. Although the earnings differential experienced by the job seekers with disabilities was considerable during the post-job loss period, a majority of the difference was replaced by public social insurances.
    Keywords: Disability; job loss; unemployment
    JEL: J14 J64 J68
    Date: 2014–10–28
  19. By: Heikki Pursiainen; Mika Kortelainen; Jenni Pääkkönen
    Abstract: We analyze differences in school quality using a comprehensive panel data set covering all upper secondary school graduates in Finland during the years 2002-2013. School quality is defined as the effect of the school on matriculation exam results controlling for quality of student intake. In other words, the quality difference between two schools is the expected difference in exam results for a randomly chosen student switching schools. Using methods similar to Chetty, Friedman and Rockoff (2013) we are able to measure both cross-sectional differences in school quality and the persistence of these differences over time. We also control for the uncertainty inherent in assessing the quality of smaller schools with a relatively low number of graduates. We use each pupil's comprehensive school grades to control for previous education / pupil quality. Also, comprehensive school fixed effects are used to control for differences in comprehensive school grading as well as unobserved socioeconomic factors. The method is potentially sensitive to bias induced by school selection. To assess the potential bias we partially match our student sample to a spatial database by home address and use this to assess bias. We find no evidence of significant bias. Our first result is that there are significant cross-sectional differences in school quality even after controlling for student intake quality. The quality difference between the top schools and bottom schools each year measured in average matriculation score points is around one grade point in a scale of 1 to 7. In Finland university entry is partly controlled by these matriculation exam results. A one-point difference in grade averages will significantly affect the chances of entry into the most competitive university curricula. This result must, however, be qualified in a number of ways. First, large differences are observed only between the very top and bottom institutions. Most schools are much closer to each other in quality: the interquartile range each year is only about a fifth of a grade average point. Most schools are thus clustered quite close to each other in quality. Also, while there is persistence over time in school quality, this is far from complete. This means that the ranking of the middling-quality majority of schools is highly unstable over time, making any yearly league tables highly suspect. There is more persistence in the very top and bottom institutions, which are roughly the same during the whole period under consideration. Finally, school quality seems to be for the most part evenly distributed regionally. While there are certainly good schools in the largest cities, the success of the most selective institutions is mostly explained by quality of intake rather than teaching.
    Keywords: education; school ranking; regional differences in education provision;
    JEL: I24 I28 C22
    Date: 2014–11
  20. By: Kai Liu (Norwegian school of economics); Marc Chan (University of Technology Sydney)
    Abstract: In 1998, Norway implemented the cash-for-care reform ("kontant stoette"), which provided cash to families with young children who did not use government-subsidized child care facilities. The reform resulted in a sizable exogenous change in the relative price of child care facilities, which interacted with pre-existing regional variations in the child care system. Using administrative data from 1995 to 2010, we examine the effects of the reform by estimating a dynamic structural model of maternal employment, fertility, and child care use for multiple children. We investigate the effects of such behavioral changes on the long-run cognitive outcomes of children, by estimating a cognitive ability production function with data on national test scores. Numerical results from several counterfactual exercises, including budget analysis, are presented. In particular, we compare the effects of existing and alternative child care polices with the effects of the maternity leave system.
    Date: 2014

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