nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒01‒19
24 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. State dependence and labour market transitions in the European Union. By Richard Duhautois; Christine Erhel; Mathilde Guergoat-Larivière
  2. Tradable Refugee-admission Quotas: a Policy Proposal to Reform the EU Asylum Policy By Jesús Fernández-Huertas Moraga
  3. Eligibility and inclusiveness of Long-Term Care Institutional frameworks in Europe: a cross-country comparison By Ludovico Carrino; Cristina Elisa Orso
  4. Decomposing inequality 'at work': Cross-country evidence from EU-SILC By Vincenzo Carrieri; Vito Peragine
  5. Does flexible employment pay? European evidence on the wage perspectives of female workers By Iga Magda; Monika Potoczna
  6. Are Armington Elasticities Different across Countries and Sectors? – A European Study By Zoryana Olekseyuk; Hannah Schürenberg-Frosch
  7. Green inventions and greenhouse gas emission dynamics: A close examination of provincial Italian data By Ding Weina; Marianna Gilli; Massimiliano Mazzanti; Francesco Nicolli
  8. Does Proximity Matter in the Choice of Partners in Collaborative R&D Projects? – An Empirical Analysis of Granted Projects in Germany By C. Fuhrmeister; Mirko Titze; U. Blum; Philipp Marek
  9. How the labour market evaluates Italian universities By Emanuele Ciani; Vincenzo Mariani
  10. Who Dares, Wins? - A Sibling Analysis of Tertiary Education Transition in Germany By Tamás Keller; Guido Neidhöfer
  11. The Tower of Babel in the Classroom: Immigrants and Natives in Italian Schools By Ballatore, Rosario Maria; Fort, Margherita; Ichino, Andrea
  12. Support Schemes for Renewable Electricity in the European Union: Producer Strategies and Competition By Luisa Dressler
  13. Short term effects of public smoking bans on health By Fabrizio Mazzonna; Paola Salari
  14. Exports, agglomeration and workforce diversity: An empirical assessment of German establishments By Stephan Brunow; Luise Grünwald
  15. Capacity remuneration mechanisms in the European market: now but how? By Arthur Henriot; Jean-Michel Glachant
  16. Regional policies to foster firms' innovation activity By Francesca Lotti; Maria Lucia Stefani
  17. Can political inequalities be educated away? Evidence from a Swedish school reform By Lindgren, Karl-Oskar; Oskarsson, Sven; T Dawes, Christopher
  18. How do new entrepreneurs innovate? By Gabriele Pellegrino; Mariacristina Piva; Marco Vivarelli
  19. Appointed Versus Elected Mayors and Incentives to Pork-Barrel: Quasi-Experimental Evidence from Germany By Zohal Hessami
  20. Enterprise productivity: a three-speed Europe By Dall'Olio, Andrea; Iootty, Mariana; Kanehira, Naoto; Saliola, Federica
  21. The academic and labor market returns of university professors By Michela Braga; Marco Paccagnella; Michele Pellizzari
  22. Financial Work Incentives for Disability Benefit Recipients: Lessons from a Randomised Field Experiment By Bütler, Monika; Deuchert, Eva; Lechner, Michael; Staubli, Stefan; Thiemann, Petra
  23. Social Capital and Firm’s Productivity in Italy: a Multilevel Approach By Sebastiano Nerozzi; Vito Pipitone; Giorgio Ricchiuti
  24. Retail market structure and consumer prices in the euro area By Ciapanna, Emanuela; Rondinelli, Concetta

  1. By: Richard Duhautois (Centre d'Etudes de l'Emploi et Université Paris-Est Marne-la-Vallée); Christine Erhel (Centre d'Etudes de l'Emploi et Centre d'Economie de la Sorbonne); Mathilde Guergoat-Larivière (Conservatoire National des Arts et Métiers (LIRSA) et Centre d'Etudes de l'Emploi)
    Abstract: Using conditional dynamic multinomial logit models that allow to disentangle between state dependence and unobserved heterogeneity, this article proposes an empirical analysis of labour market mobility in the European Union based on EU-SILC data. It shows that the role of true state dependence varies a lot across social groups (according to age, sex and education) and across countries. In particular, state dependence can be related for the different social groups and country groups studied to various structural explanations in terms of institutional arrangements (education and retirement policies, leave policies, childcare policies, labour market policies…) and/or to employers' behaviour.
    Keywords: Labour market mobility, state dependence, unobserved heterogeneity, European Union, inequalities, institutions.
    JEL: J60 J62 J64 J68
    Date: 2014–11
  2. By: Jesús Fernández-Huertas Moraga
    Abstract: he current EU Asylum policy is widely seen as ineffective and unfair. We propose an EU-wide market for tradable quotas on both refugees and asylum-seekers coupled with a matching mechanism linking countries' and migrants' preferences. We show that the proposed system can go a long way towards addressing the shortcomings of the existing system. We illustrate this claim using the recent problems regarding relocation faced by the European Asylum Support Office (EASO) in Malta.
    Keywords: immigration policy
    Date: 2014–10–13
  3. By: Ludovico Carrino (Department of Economics, University Of Venice Cà Foscari); Cristina Elisa Orso (Department of Economics, University Of Venice Ca’Foscari)
    Abstract: Although economic literature has recently started to concentrate on the design, the scope and the regulations of main public programmes of Long-Term-Care in Europe, no analysis have, so far, compared different systems in terms of their degree of inclusiveness with respect to vulnerable elderly’s health status. Focusing on several European countries, this paper investigate how LTC regulations assess vulnerability, as well as how they define a minimum level of objective-dependency that would entitle individuals to receive public benefits (in-kind or in-cash) for home-based care. Our contribution is threefold. We provide detailed information on assessment and eligibility frameworks for eleven LTC programmes in Europe. We show that substantial heterogeneities exist both at the extensive margin (the health-outcomes that are included in the vulnerability-assessment) and at the intensive margin (the minimum vulnerability threshold that defines benefit eligibility) of the assessment strategies. Building on this information, we compare LTC programmes in terms of their degree of inclusiveness, i.e., we investigate the extent to which each programme is able to cover a standard population of elderly individuals facing functional and cognitive limitations. The comparison is performed following both a directly- and an indirectly- adjusted strategy using SHARE data.
    Keywords: Long-term care, eligibility, access to home-care, vulnerability, direct adjustment, indirect adjustment, inclusiveness, Europe
    JEL: H53 I18 I11
  4. By: Vincenzo Carrieri (CELPE and University of Salerno, Italy); Vito Peragine (University of Bari, Italy)
    Abstract: We propose an empirical model to estimate inequality of opportunity (IOp) among workers and to distinguish two different sources of inequality: (i) inequality in the labour attachment and (ii) inequality in the remuneration of each working hour. Considering working hours as a measure of effort, our model can also be conceived as an attempt of disentangling the direct from the indirect contribution of circumstances to IOp. We estimate a system of seemingly unrelated regression equations and we use an original identification strategy based on a local market condition variable acting as exclusion restriction. By using data from the 2011 wave of the EU-SILC data base, we find in general a strong positive direct effect and a negative indirect effect of circumstances on overall IOp. Moreover, we are able to identify three cluster of countries: a first cluster includes continental countries (Italy, Spain, France) and Sweden, which show a low degree of IOp. A second cluster shows "moderate" levels of IOp and includes Finland and United Kingdom. A third cluster of countries show the highest levels of IOp and includes all eastern countries.
    Keywords: inequality of opportunity, income inequality, labour attachment
    JEL: D61 D63 J62
    Date: 2014–12
  5. By: Iga Magda; Monika Potoczna
    Abstract: The aim of this paper is to explore three issues relating to the financial dimension of female labour market outcomes. Firstly we analyze the gender pay differentials, adding to the existing literature an age - and distribution specific gender pay gaps. Next, we investigate the wage returns associated with two flexible types of employment, namely temporary and part time jobs. Our results show that flexible employment forms offer no consistent pattern of age-specific wage returns. Eastern and Western European countries differ in some aspects: young women in the former experience much larger pay gaps at the beginning of their working careers (compared to men), and their wage penalties associated with fixed term contracts tend to increase with age. Part time work appears to be beneficial mainly for the high paid women.
    Keywords: Gender pay gap, Part-time work
    JEL: J16 J31
    Date: 2014–03
  6. By: Zoryana Olekseyuk; Hannah Schürenberg-Frosch
    Abstract: CGE models are widely used for policy evaluation and impact analysis especially with respect to trade reforms, tax reforms, energy sector reform and development policy analysis. However, the results of such models are often argued to be sensitive to the choice of exogenous parameters such as trade elasticities. Several authors show that the choice of the so-called Armington elasticities in the import demand function has a strong influence on the simulation results. Most existing estimates of Armington elasticities are only for the US. The few studies for other countries find substantially differing results. Nevertheless, many CGE modelers simply adopt the elasticities from the literature. This paper aims at providing estimated elasticities based on recent data for a larger group of European countries. Using cointegration and panel fixed effects analyses we estimate the first order condition resulting from cost minimization or utility maximization subject to the CES subutility or cost function in imports and domestic goods. The results show a rather large variation across sectors and countries and the magnitude is only partly comparable to the US elasticities. Moreover, in a small CGE application we are able to show that changing the elasticity set has a quantitative and even qualitative impact on CGE model results, which confi rms the concern that one might end up with biased results due to a misspecification of the elasticities.
    Keywords: Informal care; labour supply; cognitive ability; physical and mental health
    JEL: I12 J14 J18 J22
    Date: 2014–11
  7. By: Ding Weina (Beijing Institute of Technology, Beijing, China.); Marianna Gilli (Department of Economics and Management, University of Ferrara, Italy.); Massimiliano Mazzanti (Department of Economics and Management, University of Ferrara, Italy.); Francesco Nicolli (IRCReS-CNR, Italy; Department of Economics and Management, University of Ferrara, Italy.)
    Abstract: Eco-innovation plays a crucial role in reducing carbon emissions. Exploiting the consolidated IPAT / STIRPAT framework, this paper studies whether a relationship exists between green technological change and both CO2 emissions and emission efficiency (CO2/VA), exploiting a rich panel covering 95 Italian provinces from 1990-2010. The main regression results suggest that green technology has not yet played a significant role in promoting environmental protection, although it significantly improved significantly environmental productivity. Notably, this result is not driven by regional differences, and the main evidence is consistent among different areas of the country.
    Keywords: CO2 emission, Technological Change, Green Patents, IPAT, Environmental Performance
    JEL: Q53 Q55
    Date: 2014–12
  8. By: C. Fuhrmeister; Mirko Titze; U. Blum; Philipp Marek
    Abstract: This paper contributes to the discussion on the importance of physical distance in the emergence of cross-region collaborative Research and Development (R&D) interactions. The proximity theory, and its extensions, is used as a theoretical framework. A spatial interaction model for count data was implemented for the empirical analysis of German data from the period from 2005 to 2010. The results show that all tested proximity measurements (geographical, cognitive, social and institutional proximity) have a significant positive influence on collaboration intensity. The proximity paradox, however, cannot be confirmed for geographical, social and institutional proximity, but for cognitive proximity.
    Keywords: proximity theory, proximity paradox, gravity models, cross-regional collaborations, spatial interaction
    JEL: O18 R00 R11
    Date: 2014–12
  9. By: Emanuele Ciani (Bank of Italy); Vincenzo Mariani (Bank of Italy)
    Abstract: We analyse how the labour market implicitly evaluates Italy's higher education system by estimating differences in employment and earnings across universities. We use our estimates to produce three rankings of universities based, respectively, on employment, earnings and employment-weighted earnings. By controlling for a large set of covariates, we isolate each university effect on employment and earnings from additional components influencing graduates' labour market outcomes, namely the university's field of specialization, the graduates' observable characteristics and their local labour markets. To account for the latter, we include graduates' employment rate in the region of residence among the covariates but we instrument it with prior residence in order to correct for endogenous sorting. We discuss pros and cons of our methodology and compare our results with other available university rankings.
    Keywords: university ranking, higher education, labour market
    JEL: I23 J24 J31
    Date: 2014–11
  10. By: Tamás Keller; Guido Neidhöfer
    Abstract: Past studies have found that parental background has a considerable impact on educational decisions. Our knowledge is, however, still limited regarding educational transitions later in life, such as into tertiary education. Is parental background a predominant factor in this relatively late educational decision, or do individual talent and determination have an impact of their own? We address this question by decomposing the probability of success – regarded by rational choice models in sociology as a major component in the explanation of educational choices – as a function of observable and unobservable characteristics, using school grades and subjective perceptions about future educational success. Tocontrol for the overall effect of family background, a sibling analysis is performed. The data is derived from the German Socioeconomic Panel (SOEP), where we can follow those pupils who participated in the survey at the age of 17 later in life. Our results are twofold. Parental background (through school grades) exerts a strong influence at the time of transition to university; however, subjective perceptions also have an effect that is independent of parental background.
    Keywords: Tertiary education transition, sibling analysis, subjective perceptions, rational choice
    JEL: I23 I24 J62
    Date: 2014
  11. By: Ballatore, Rosario Maria (Bank of Italy); Fort, Margherita (University of Bologna); Ichino, Andrea (European University Institute)
    Abstract: We exploit rules of class formation to identify the causal effect of increasing the number of immigrants in a classroom on natives test scores, keeping class size constant (Pure Composition Effect). We explain why this is a relevant policy parameter although it has been neglected so far. We show that the PCE is sizeable and negative at age 7 (-1.6% for language and math) and does not vanish when children grow up to age 10. Conventional estimates are instead smaller because they are confounded by endogenous class size adjustments implemented by principals when confronted with immigrant and native inflows.
    Keywords: education, immigration, integration
    JEL: C36 I20 I24 J15
    Date: 2014–12
  12. By: Luisa Dressler
    Keywords: oligopoly; forward market; renewable electricity; feed-in tariff; premium
    JEL: G13 L13 L98 Q42 Q48
    Date: 2014–12
  13. By: Fabrizio Mazzonna (Università della Svizzera Italiana (USI) and MEA (Munich Center for the Economics of Ageing) at Max Planck Institute for Social law and Social Policy); Paola Salari (Università della Svizzera Italiana (USI))
    Abstract: This paper evaluates the causal negative effect of environmental tobacco exposure on health by exploiting the time and geographical variation in public-place smoking bans implemented in Switzerland between 2007 and 2011. Using monthly data from the universe of Swiss hospitals between 2004 and 2012, we show that the incidence of acute myocardial infarction hospitalizations decreases by about 10-12% immediately after the law implementation. We also find evidence of heterogeneity by age and sex and across income and education groups. In particular, the policy affected mainly men aged 50+ and the regions characterized by a lower level of income and education.
    Keywords: smoking bans, policy evaluation, infarction, hospital data, health inequality
    JEL: C23 H75 H77 I14 I18
    Date: 2014–12
  14. By: Stephan Brunow (Institut für Arbeitsmarkt- und Berufsforschung (IAB)); Luise Grünwald (Technische Universität Dresden)
    Abstract: Theoretical and empirical contributions on export behavior highlight the importance of firms' productivity and their levels of economies of scale on firms' export success in `foreign’ markets. In the context of agglomeration economies, firms enjoy productivity gains when they are located close to competitors or upstreaming industries and they benefit from knowledge spillovers and other positive externalities. In such a stimulating environment, firms become more prone to be exporters. Beyond the role played by externalities, firms may benefit when they employ a diverse workforce and when the interaction of distinct knowledge and related problem-solving abilities increases productivity and secures export success. In this paper, we ask whether German firms (i.e., establishments) benefit from localization and urbanization externalities and face higher export proportions. We also control for a variety of establishment characteristics and workforce diversity. For this purpose, a comprehensive German data set that combines survey data and administrative data is used. While controlling for firm heterogeneity in a fractional response model, we provide evidence that manufacturing establishments and smaller establishments (up to 250 employees) benefit most from externalities and especially from knowledge spillover. There is weak evidence supporting the benefit of workforce diversity; however, that factor could explain between-establishment variation.
    Keywords: Export behavior, firms, agglomeration economies, cultural and workforce diversity
    JEL: D F J M R12
    Date: 2014–12
  15. By: Arthur Henriot; Jean-Michel Glachant
    Abstract: This article addresses the functioning of capacity remuneration mechanisms (CRMs) in an integrated European electricity market featuring a high share of intermittent renewable energy sources. We first highlight the close ties between flexibility provision and generation adequacy, and explain why these two issues must be considered concomitantly when developing CRMs. We then show that while Member States have different needs, addressing security of supply in a purely national way will be expensive. We finally identify three prerequisites for a workable Europeanization of national generation adequacy mechanisms: a consistent assessment of adequacy needs and cross-border resources, a dedicated method to allocate risks and remuneration of cross-border resources contribution, and a definition of rights over the system resources at times of extreme scarcity.
    Keywords: Capacity remuneration mechanisms, Security of Supply, Flexibility, Integrated Energy Market
    Date: 2014–09
  16. By: Francesca Lotti (Bank of Italy); Maria Lucia Stefani (Bank of Italy)
    Abstract: Following the constitutional reform of 2001, which gave increased autonomy Italian regions, and the new European guidelines from the Lisbon Agenda, there has been an upturn in regional legislative activity concerning innovation, leading to a critical review of the instruments adopted, mainly towards greater selectivity. Regional intervention tends to be highly fragmented, focusing on the funding of applied research and using grants as the preferred policy tool. In terms of sources of funds, structural funds have gained importance since the 2007-13 programming cycle, partly due to the economic crisis, and in the southern regions account for nearly all the resources devoted to fostering innovation. This paper presents a summary indicator, consisting of three "sub-indicators" approximating, respectively, the input of the innovation process, innovation output, and a quantitative measure of regional policies for innovation.
    Keywords: Innovation, regional policies
    JEL: O38 R58
    Date: 2014–11
  17. By: Lindgren, Karl-Oskar (IFAU - Institute for Evaluation of Labour Market and Education Policy); Oskarsson, Sven (Department of Government, Uppsala University); T Dawes, Christopher (Department of Politics, New York University)
    Abstract: Over the years, many suggestions have been made on how to reduce the importance of family background in political recruitment. In this study, we examine the effectiveness of one such proposal: the expansion of mass education. More precisely, we utilize a difference-in-difference strategy to analyze how a large school reform launched in Sweden in the 1950s, which lengthened compulsory schooling and postponed tracking, affected the likelihood of individuals with different family backgrounds to run for public office. The data comes from public registers and pertains to the entire Swedish population born between 1943 and 1955. Overall, the empirical analysis provides strong support for the view that improved educational opportunities for individuals from disadvantaged backgrounds can be an effective means to reduce the importance of family background in political recruitment. According to our estimates, the Swedish comprehensive school reform served to reduce the effect of family background on the likelihood of running for public office by up to 40 percent.
    Keywords: Political inequality; political participation; political candidacy; inequality; education
    JEL: H70 I24
    Date: 2014–12–19
  18. By: Gabriele Pellegrino (SPRU, University of Sussex); Mariacristina Piva (DISCE, Università Cattolica); Marco Vivarelli (DISCE, Università Cattolica - SPRU, University of Sussex - IZA, Bonn)
    Abstract: This paper analyses the determinants of product innovation in Italian young innovative companies (YICs) by looking at in-house and external R&D and at the acquisition of external technology in its embodied and disembodied components. A Tobit approach is applied to study jointly the occurrence of product innovation and the intensity of such innovation. Results provide evidence that in-house R&D is linked to product innovation both in mature firms and YICs; however, YICs turn out to be less in-house R&D-based and more dependent on external sources of knowledge. Moreover, other entrepreneurial attitudes such as the ability to cooperate with other firms in producing innovation or the capacity to develop significant organizational changes appear to be less important or even absent in Italian YICs. These results are somehow worrying, since they show that Italian innovative entrepreneurs are mostly driven by routinized rather than creative strategies.
    Keywords: YICs; entrepreneurship, R&D, product innovation
    JEL: L26 O31
    Date: 2014–11
  19. By: Zohal Hessami (Department of Economics, University of Konstanz, Germany)
    Abstract: Do incentives and policy choices of public officials depend on whether they are appointed by an elected body or directly elected by voters? I investigate this question using the example of state grants for highly visible municipal investment projects. To attract these grants, mayors must prepare and submit applications to the state government. My identification strategy exploits a natural experiment in a German state where mayor elections were gradually introduced. The difference-in-differences estimation results show that elected mayors attract 7 to 8% more investment grants from the state tier in election years, while for appointed mayors there is no cycle. Results based on hand-collected data for individual mayors exclude alternative transmission channels such as changes in (self-)selection of mayors or partisan alignment in grant allocation.
    Keywords: Mayor elections; local government; electoral incentives; pork-barrel politics; intergovernmental grants
    JEL: D72 H72 H77
    Date: 2014–12–01
  20. By: Dall'Olio, Andrea; Iootty, Mariana; Kanehira, Naoto; Saliola, Federica
    Abstract: Between 2003 and 2008 productivity patterns diverged between the fast growing, newest members of the European Union and the slower paced, elder ones – as would be expected. However, there are also striking divergences within the latter group, with productivity in Southern Europe going into reverse. This paper analyzes which factors - whether countrylevel or firm-specific ones - contributed more to the emergence of a three-speed Europe. The analysis combines firm-level data with country-level inputs. Among the newest members of the European Union, country characteristics including the stock of inward foreign direct investment, the availability of credit, and the quality of the business environment and the skills of the workforce prove to be the most important drivers. Firm specific characteristics are shown to matter as well, notably that small firms and firms which are part of international groups realize more productivity gains than larger domestic competitors. Among the more advanced member countries, firm-level characteristics are most important, with larger firms and firms with international affiliation demonstrating faster productivity gains. Country specific factors, such as the quality of the business environment, the size of outward FDI and the skills of the workforce, do matter as well. These explanations of diverging productivity patterns suggest that European Union nations can realize significant benefits from low cost policy interventions such as improving business regulations and encouraging firms’ internationalization. JEL Classification: D22, H11, O47, O52
    Keywords: doing business, European Union, firm characteristics, firm performance, foreign direct investment, global value chains, productivity, regulation
    Date: 2014–12
  21. By: Michela Braga (Bocconi University); Marco Paccagnella (OECD and Bank of Italy); Michele Pellizzari (University of Geneva)
    Abstract: This paper estimates the impact of university teachers on their students� academic achievement and labor market outcomes using administrative data from Bocconi University matched with Italian tax records. The estimation exploits the random allocation of students to teachers in a fixed sequence of compulsory courses. We find that the academic and labor market returns of teachers are only mildly positively correlated and that the professors who are best at improving the academic achievement of their best students are not always also the ones who boost their students� earnings the most, especially for the least able students.
    Keywords: teacher quality, higher education
    JEL: I20 M55
    Date: 2014–10
  22. By: Bütler, Monika (University of St. Gallen); Deuchert, Eva (University of St. Gallen); Lechner, Michael (University of St. Gallen); Staubli, Stefan (University of Calgary); Thiemann, Petra (University of Southern California)
    Abstract: Disability insurance (DI) beneficiaries lose part of their benefits if their earnings exceed certain thresholds (“cash-cliffs”). This implicit taxation is considered the prime reason for low DI outflow. We analyse a conditional cash program that incentivises work related reductions of disability benefits in Switzerland. 4,000 randomly selected DI recipients receive an offer to claim up to CHF 72,000 (USD 71,000) if they expand work hours and reduce benefits. Initial reactions to the program announcement, measured by call-back rates, are modest; individuals at cash-cliffs react more frequently. By the end of the field phase, the take-up rate amounts to only 0.5%.
    Keywords: disability insurance, field experiment, financial incentive, return-to-work
    JEL: H55 J14 C93 D04
    Date: 2014–12
  23. By: Sebastiano Nerozzi; Vito Pipitone; Giorgio Ricchiuti (Dipartimento di Scienze per l'Economia e l'Impresa)
    Abstract: Matching and merging different databases, we study how firm’s productivity is affected by individual characteristics and provincial context conditions in Italy. Mainly, we focus on the relation between social capital, in its different forms and dimensions and calculated at provincial level and firms’ productivity, calculated using the non-parametric DEA approach. We find that exporting, self-financing firms, and firms belonging to groups, are more productive. In particular, Cooperative firms are more productive than limited company. Moreover, the variables capturing the social capital show strong positive correlation with firms’ productivity, indicating that a widespread civism intended as pro-social behavior independent of specific interpersonal bounds, seems to create an economic environment which is more favorable to entrepreneurship and collaboration among firms, since it increases interpersonal trust, lowers transaction costs, enhances the compliance of formal or informal rules of fairness and fosters a more transparent, impartial and efficient working of the public administration.
    Keywords: DEA, productivity, social capital, inequality, multilevel approach
    JEL: C19 D24 R10
    Date: 2014
  24. By: Ciapanna, Emanuela; Rondinelli, Concetta
    Abstract: We investigate the empirical relationship between product market competition and prices in the retail grocery sector in the euro area. The study uses micro-data from ACNielsen on chain stores' census characteristics and price levels for a broad variety of products. We construct Herfindahl-Hirschman indices of concentration at different levels of market aggregation (buying group and parent company) to investigate their effects on prices. The analysis confirms the inverse relation between downstream market competition among retailers and price levels for most of the reference products. Though less conclusive in terms of statistical significance, the proposed estimates also point to a welfare enhancing role of buying groups. Our results indicate that buying groups provide a balancing mechanism between retailers' and producers' bargaining power, in support of the countervailing power hypothesis. JEL Classification: L1, L4, L8, E31
    Keywords: buying group, market concentration, parent company, price levels, regional Herfindahl-Hirschman indices
    Date: 2014–12

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