nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒01‒26
twenty papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Tax and Transfer Policies and the Female Labor Supply in the EU By Klara Kaliskova
  2. The labour market impacts of a youth guarantee: lessons for Europe? By Kari Hämäläinen; Juha Tuomala; Ulla Hämäläinen
  3. Reducing Binge Drinking? The Effect of a Ban on Late-Night Off-premise Alcohol Sales on Alcohol-Related Hospital Stays in Germany By Jan Marcus; Thomas Siedler
  4. Turbulence and the Employment Experience of Older Workers By Etienne Lalé
  5. The Impact of Precarious Employment on Mental Health: the Case of Italy By Moscone, Francesco; Tosetti, Elisa; Vittadini, Giorgio
  6. Trade, import competition and productivity growth in the food industry By Olper, Alessandro; Pacca, Lucia; Curzi, Daniele
  7. The Effect of Pay Cuts on Psychological Well-Being and Job Satisfaction By Drakopoulos, Stavros A.; Grimani, Katerina
  8. Linking Europe - The Role of the Swiss Electricity Transmission Grid until 2050 By Ingmar Schlecht; Hannes Weigt
  9. Preferences towards CO2 capture and storage in the European Union: a structural equation modelling analysis By Toma, Luiza; Barnes, Andrew Peter; Revoredo-Giha, Cesar; Tsitsoni, Viktoria; Glenk, Klaus
  10. Where are the retirement savings of self-employed? An analysis of 'unconventional' retirement accounts By Mauro Mastrogiacomo; Rob Alessie
  11. House Price Shocks and Household Savings: evidence from Dutch administrative data By Nancy van Beers; Michiel Bijlsma; Remco Mocking
  12. Differences in the effects of fuel price and income on private car use in Sweden 1999-2008 By Pyddoke, Roger; Swärdh, Jan-Erik
  13. Inequality of opportunity in Europe before and after the Great Recession By Michał Brzeziński
  14. Financial Literacy, Human Capital and Stock Market Participation in Europe: An Empirical Exercise under Endogenous Framework By Ashok Thomas; Luca Spataro
  15. Liquidity Constraints and University Participation in Times of Recession. Evidence from a Small-scale Programme By Loris Vergolini; Nadir Zanini; Nicola Bazoli
  16. "School’s out for summer, school’s out forever": the long-term health consequences of leaving school during a bad economy By Godard, Mathilde; Garrouste, Clémentine
  17. Candidate screening for the recruitment of critical research and development workers: A report and preliminary results with evidence from experimental data from German high-tech firms By Frosch, Katharina; Harhoff, Dietmar; Hoisl, Karin; Steinle, Christian; Zwick, Thomas
  18. Capitalization of the Single Payment Scheme into Land Value: Generalized Propensity Score Evidence from the EU By Michalek, Jerzy; Ciaian, Pavel; Kancs, d'Artis
  19. Does Market Orientation in Small-Scale farms pay off? A study of Innovation behaviour in Spanish agriculture By López-Mosquera, Natalia; Álvarez-Coque, José María García; Sánchez, Mercedes

  1. By: Klara Kaliskova
    Abstract: This study contributes to the female labor supply responsiveness literature by measuring the eect of tax-benefit policies on female labor supply based on a broad sample of 26 European countries in 2005-2010. The tax-benefit microsimulation model EUROMOD is used to calculate the measure of extensive margin work incentives - the participation tax rate, which is then used as the main explanatory variable in a female participation equation. This allows me to deal with the endogeneity of income in a new way by a simulated instrumental variable based on a fixed EU-wide sample of women. Results suggest that a 10 percentage point increase in the participation tax rate decreases the female employment probability by 2 percentage points. The effect is higher for single mothers, for women in the middle of the skills distribution, and in countries that have lower rates of female participation.
    Keywords: female labor supply; tax and benefit system; Europe; instrumental variable;
    JEL: C25 H24 H31 J22
    Date: 2014–12
  2. By: Kari Hämäläinen; Juha Tuomala; Ulla Hämäläinen
    Abstract: This paper examines the youth guarantee programme introduced in Finland 2005. The reform consisted of early intervention, monitoring and individualized job search plans that guarantee activation measures for unemployed young persons. Using the age threshold set at 25 years, we find that the youth guarantee moderately increased unsubsidized employment while having a negligible impact on unemployment in the age range of 23-24. We also show that the positive impacts of the youth guarantee only materialize among unemployed young persons with a vocational education. There are no signs that the guarantee improved the labour market prospects of young uneducated people.
    Keywords: Youth unemployment, social exclusion, activation, youth guarantee, difference-in-differences
    JEL: J64 J68 C41 C21
    Date: 2014–12–18
  3. By: Jan Marcus; Thomas Siedler
    Abstract: Excessive alcohol consumption among young people is a major public health concern. On March 1, 2010, the German state of Baden-Württemberg banned the sale of alcoholic beverages between 10pm and 5am at off-premise outlets (e.g., gas stations, kiosks, supermarkets). We use rich monthly administrative data from a 70 percent random sample of all hospitalizations during the years 2007-2011 in Germany in order to evaluate the short-term impact of this policy on alcohol-related hospitalizations. Applying difference-in-differences methods, we find that the policy change reduces alcohol-related hospitalizations among adolescents and young adults by about seven percent. There is also evidence of a decrease in the number of hospitalizations due to violent assault as a result of the ban.
    Keywords: Binge drinking, drinking hours, alcohol control policies, difference-in-differences, hospital diagnosis statistics, alcohol
    JEL: I12 I18 D04
    Date: 2015
  4. By: Etienne Lalé
    Abstract: This paper studies the secular employment experience of older workers on both sides of the Atlantic, using a common framework to characterize changes in the macro-economy. We embed Ljungqvist and Sargent (1998, 2008)’s turbulence story into a general equilibrium environment with an operative labor supply margin. The model can jointly explain (i) the fall in (male) labor force participation in the United States, (ii) the similar but more pronounced decline in Europe along with rising unemployment rates and (iii) the concentration of these adverse employment outcomes on older workers. We use this framework to discuss the labor market effects of early retirement benefits. These benefits generate significant incentives to retire earlier, which in turn raises tax pressure and discourages job creation. We find that these effects are more pronounced in a turbulent economic environment, and especially so under stringent employment protection legislation.
    Keywords: Job-Search, Turbulence, European Unemployment, Labor Force Participation.
    JEL: E24 J21 J64
    Date: 2015–01
  5. By: Moscone, Francesco; Tosetti, Elisa; Vittadini, Giorgio
    Abstract: In this paper, we investigate the impact of precarious employment on mental health using a unique dataset that matches information on mental health with labour characteristics for a set of employees in Italy. We examine the causal effect of temporary contracts, their duration and the number of contract changes during the year on psychotropic medication prescription. To this end, we estimate a dynamic probit model, and deal with the potential endogeneity of regressors by adopting a control function approach, recently advanced by Wooldridge (2014). Our results show that the probability of psychotropic medication prescription is higher for workers under temporary job contracts. More days of work under temporary contract as well as more changes in temporary contracts significantly increase the probability of being depressed. We also find that moving from permanent to temporary contracts increases depression; symmetrically, although with a smaller effect in absolute value, moving from temporary to permanent contracts tends to reduce it. An exploratory data analysis corroborates the hypothesis that depression developed after a movement to precarious employment may permanently affect future job trajectories. One lesson to learn from our empirical work is that policies aimed at enhancing the flexibility of the labour market to boost firms' competitiveness, if increasing the precariousness of employment, may also produce sides effects on the wellbeing and mental health of employees, ultimately having consequences on firms' productivity and health care costs.
    Keywords: Precarious employment, mental health, prescriptions.
    JEL: I1 I11 J0
    Date: 2015
  6. By: Olper, Alessandro; Pacca, Lucia; Curzi, Daniele
    Abstract: Melitz and Ottaviano’s (2008) firm-heterogeneity model predicts that trade liberalization induces a selection process from low to high productivity firms, which translates to an industry productivity growth. A similar firms’ selection effect is induced by market size. In this paper, these predictions are tested across 25 European countries and 9 food industries, over the 1995–2008 period. Using different dynamic panel estimators we find strong support for the model predictions, namely that an increase in import penetration is systematically positively related to productivity growth. The results are robust to measurement issues in productivity, controlling for market size, country and sector heterogeneities, and for the endogeneity of import competition. Interestingly, this positive relationship is almost exclusively driven by competition in final products coming from developed (especially EU-15) countries, suggesting that EU food imports are closer substitutes for domestic production than non-EU imports. These results have some potentially interesting policy implications.
    Keywords: Import competition, Productivity growth, Food Industry, European Countries, Dynamic panel model, International Relations/Trade,
    Date: 2014–08
  7. By: Drakopoulos, Stavros A.; Grimani, Katerina
    Abstract: One of the main economic outcomes of the recent great recession was the decrease of labour earnings in many countries. The relevant literature indicates that earnings and other socioeconomic predictors can influence psychological well-being. The same holds true for job satisfaction. This chapter tests the effect of pay cuts on the psychological well-being and job satisfaction. The data used in this chapter was drawn from the 5th European Survey on Working Conditions which focuses on European countries. The methodological tools for analyzing the data are the ordinary least-squares (OLS) regression, the Probit regression, and the marginal effects method. The results point to a negative statistical significant effect of pay cuts (decrease labour earnings) on psychological well-being. The results also indicate that pay cuts have a negative statistical significant impact on job satisfaction.
    Keywords: Pay cuts, job satisfaction, psychological well-being
    JEL: I31 J30
    Date: 2015–01
  8. By: Ingmar Schlecht; Hannes Weigt (University of Basel)
    Abstract: <span lang="EN-US">The aim of this paper is to evaluate the role of the Swiss electricity transmission system and the planned network extensions in the context of Central European electricity market developments and thereby the Swiss and European energy transitions. In addition, we conduct a sensitivity analysis of delayed grid investments for Swiss and European network projects, respectively. By deriving a quantification of potential costs and system stability impacts due to delayed network investments, we can identify whether the currently observed lag in many energy investments poses a threat to achieving the envisioned energy transitions.</span>
    Keywords: Switzerland, energy transition, network extension, investment delay
    JEL: L94
    Date: 2014
  9. By: Toma, Luiza; Barnes, Andrew Peter; Revoredo-Giha, Cesar; Tsitsoni, Viktoria; Glenk, Klaus
    Abstract: The paper analyses the impact that European Union citizens’ access to information on climate change has on their awareness of carbon capture and storage (CCS), perceived risks and benefits of using CCS and stated choice of preferred CCS options. We use Eurobarometer data about awareness/acceptance of CCS and run structural equation models for twelve EU countries with an average sample size of 1100 observations per country. Results between the different countries are comparable and, alongside other determinants, access to information sources significantly impacts CCS awareness, perceived risks and benefits of CCS and preferences towards options of CCS.
    Keywords: CO2 capture and storage, EU citizens’ CCS knowledge and attitudes, structural equation models., Environmental Economics and Policy,
    Date: 2014–08
  10. By: Mauro Mastrogiacomo; Rob Alessie
    Abstract: Survey data show that many respondents save for retirement in unconventional retirement accounts, such as investments in real estate. In countries where retirement savings are not mandatory for self-employed, representatives of this group often report this as an argument against making retirement savings compulsory. Our study shows that self-employed retirement savings are low and below individually pre-stated saving intentions, even though this group has generally no occupational pension. We also study the relation between the importance of a broad spectrum of saving motives, such as saving for retirement, and saving behavior. We show that finding the retirement motive important does not directly translate in additional retirement savings, both for self-employed and employees. The (median) annuity stream generated by conventional and unconventional accounts from age 67 is small; most savings are residual and are not being put aside for a specific motive.
    Keywords: retirement savings; precautionary savings; factor analysis; saving goals
    JEL: D12 D91 E21
    Date: 2015–01
  11. By: Nancy van Beers; Michiel Bijlsma; Remco Mocking
    Abstract: We study the effect of house price shocks on the savings behaviour of Dutch homeowners over the period 2006-2011. Using unique administrative data, we build a balanced panel of slightly less than 2 million Dutch home owning households, containing information on house values, wealth, income and other background characteristics. We find a negative relationship between house price changes and savings, with the largest effects for young households with negative housing equity. In our baseline specification, we find larger effects for house price increases compared to house price decreases. Households of age 30 with loan-to-value ratios above one, save roughly 3 euro less for a 100 euro increase in house prices, while they save around 1 euro more for a 100 euro decrease. The asymmetric effect of price declines versus increases holds in most, but not all specifications.
    JEL: G12 R11 R21 R31 R52
    Date: 2015–01
  12. By: Pyddoke, Roger (VTI); Swärdh, Jan-Erik (VTI)
    Abstract: The objective of this paper is to analyse how the use of privately owned cars in Sweden varies across a number of background parameters including fuel price, disposable income, car purchase cost index, children over 18, employment and the car owners’ distance to work. These factors are analysed separately for men and women, individuals living in urban, rural and sparsely populated areas as well as disposable income quartiles. In particular the adaptation of car use of low income car owners in rural and sparsely populated areas to fuel cost and disposable income variations is analysed. Register data of the whole population in Sweden taken from the Swedish tax authorities for 1999-2008 as well as kilometre readings from the National Vehicle Inspection is used. This allows tracking individual changes in car use over ten years as well as to contrast car use in rural and sparsely populated areas to car use in urban areas. Car use is modelled with a dynamic panel data specification, permitting proper methods to deal with endogeneity problems. Small geographical differences in the sensitivity to variations in disposable income are found. For fuel cost on the other hand, there is a tendency towards higher price sensitivity in rural areas especially in the two lowest income quartiles. In sparsely populated areas, there is no higher sensitivity of fuel price compared to urban areas. The income elasticity of car use is fairly small and decreases with increasing disposable income. This latter finding is compatible with the hypothesis of car driving saturation in the rich countries around the world. The car travel elasticity with respect to fuel price is estimated to be between -0.2 and -0.4 in the short run. Here the pattern is as expected with decreasing fuel-price elasticity with increasing income.
    Keywords: Car use; Fuel-price elasticity; Register data; Dynamic panel data
    JEL: D12 R41
    Date: 2015–01–12
  13. By: Michał Brzeziński (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This paper is a follow-up to Marrero and Rodríguez (2012), who estimated the inequality of opportunity (IO) in Europe in 2005. We use the EU-SILC 2005 and 2011 databases to compare the IO in 23 European countries before and after the Great Recession. The parametric procedure of Ferreira and Gignoux (2011) is used to measure IO. Results show that between 2004 and 2010 both absolute and relative IO increased in Belgium and Slovakia, while decreased in Portugal and Lithuania. In addition, relative IO rose in Austria, Hungary and Greece.
    Keywords: Inequality of opportunity, Great Recession, EU-SILC, circumstances, Europe
    JEL: D63 E24 O15 O52
    Date: 2015
  14. By: Ashok Thomas; Luca Spataro
    Abstract: Households’ stock market participation has significant effects on savings and on an economy’s financial development and performance. Yet participation into capital markets is limited and quite heterogonous both among and within several countries. This phenomenon represents an empirical puzzle whose understanding is rather incomplete. In this work we exploit a combination of datasets for 9 European countries and use different econometric specifications that allow to control for endogeneity of financial literacy and human capital, to assess the role of several variables in affecting the probability to participate in the stock market in year 2010. Besides socio-demographic variables, we find that financial literacy has a positive and significant effect on stock market participation, together with the level of human capital. Country level differences are explained by such institutional factors as the effectiveness of the education system, captured by the student-teacher ratio, and by the attractiveness of the stock markets, proxied by the pattern of sharpe-ratios.
    Keywords: Stock Market Participation, Financial Literacy, European Countries, Endogenous framework.
    Date: 2015–01–01
  15. By: Loris Vergolini; Nadir Zanini; Nicola Bazoli
    Abstract: In this paper we investigate the relationship between liquidity constraints and university participation. We assess an educational programme introduced in the Province of Trento (North-East of Italy) in 2009 in order to enhance university participation and to reduce social inequalities in access to higher education. The programme, known as Grant 5B, consists in generous financial aids targeted to students from low-income families with outstanding secondary school achievement. We exploit a unique dataset resulting from the linkage of administrative data with an ad hoc survey carried out on a sample of upper secondary graduates from 2009 to 2012. We use a regression discontinuity design to estimate the impact of the intervention on the transition from secondary to tertiary education and on other choices connected to university attendance in each year considered and on strata of the population of interest. We find that the programme has no significant effect on enrolment rates, but it exerts a positive and remarkable effect on redirecting students already bound for university to enrol away from their place of residence. However, that effect changes over time and, as the economic recession persists, it disappears. Our findings suggest that students who attended successfully a secondary academic track have higher probability to benefit from the Grant 5B. Moreover, given the fact there is no effect on the enrolment probability, we specify a set of regression models to account for the interplay between income and merit, in order to simulate what would happen if a change in the eligibility rules will take place. Evidence shows that a relaxation of the eligibility rules based on secondary school achievement might be more effective in fostering access to university.
    Keywords: Financial Aid, University Enrolment, Regression Discontinuity, Programme Evaluation
    Date: 2014–12
  16. By: Godard, Mathilde; Garrouste, Clémentine
    Abstract: This paper investigates whether leaving school in a bad economy deteriorates health in the longrun. We focus on individuals in England and Wales who left full-time education in their last year of compulsory schooling immediately after the 1973 oil crisis. Our identification strategy builds on two sources. First, it relies on the comparison of very similar individuals – born the same year – whose school-leaving behaviour in different economic conditions was exogeneously induced by compulsory schooling laws. More specifically, within a same birth cohort, pupils born at the end of the calendar year (September to December) were forced to leave school almost a year later than pupils born earlier in the year (January to August). Second, we exploit the sharp increase in unemployment rates generated by the 1973 oil crisis. Between 1974 and 1976, each school cohort indeed faced worse economic conditions at labour-market entry than the previous one. Unlike school-leavers who did postpone their entry on the labour market during the 1980s and 1990s recessions, we provide evidence that pupils’ decisions to leave school at compulsory age between 1974 and 1976 were not endogeneous to the contemporaneous economic conditions at labour market entry. We use a repeated cross section of individuals over 1983-2001 from the General Household Survey (GHS) and take a life-course perspective, from 7 to 26 years after school-leaving. Our results show that men who left school in a bad economy have a higher probability of smoking over the whole period (1983-2001) and of having ever smoked. Women who left school in a bad economy are more likely to report poorer health over the whole period under study. They also have a higher probability to restrict their activity due to illness or injury and to consult the General Practitioner. We do not find any significant effects of poor economic conditions at labour-market entry on subsequent labour-market, marriage and fertility outcomes.
    Keywords: General Household Survey; Labour market; School-leavers; Economic crisis; Education; England; Wales;
    JEL: J17 N34 I29
    Date: 2014–12
  17. By: Frosch, Katharina; Harhoff, Dietmar; Hoisl, Karin; Steinle, Christian; Zwick, Thomas
    Abstract: The report focuses on résumé-based screening strategies for the recruitment of highly qualified research and development (R&D) workers (critical R&D workers) in high-tech firms. We investigate which kinds of professional background, job-related experience, motivations, specific skills, and previous inventive activity make a candidate attractive for firms specializing in clean technology or mechanical elements. The report is based on a combination of survey and experimental data collected from 194 HR decision makers in German high-tech firms and from 89 technology experts in the clean technology and mechanical elements fields. A mixed logit model is used to analyse hiring preferences because this model allows us to deal with repeated choices. We find that HR decision makers prefer candidates with technology-specific patenting experience, an engineering background, analytical thinking skills, and a strong desire to develop path-breaking technologies. Furthermore, no one-size-fits-all candidate exists that is equally preferred in both technology fields. HR decision makers in mechanical element firms prefer specialists to generalists, whereas those in clean technology attach special importance to a candidate's orientation towards environmental concerns and sustainability.
    Date: 2015
  18. By: Michalek, Jerzy; Ciaian, Pavel; Kancs, d'Artis
    Abstract: This is the first paper which empirically estimates the capitalization of the Single Payment Scheme (SPS) into land values. Although, the Single Payment Scheme (SPS) is the largest expenditure category in the EU budget, the distributional impacts between land users and land owners have not been assessed empirically yet. We employ a unique farm-level panel data set, and apply the generalized propensity score matching approach to estimate the capitalization of the SPS in EU. Our results suggest that around 6-10 percent of the total SPS are capitalized into land rents. On average in the EU, the non-farming landowners' gains from the SPS are only 4 percent. However, there is a large variation in the capitalization rate for different SPS levels, and between different Member States (3 to 94 percent).
    Keywords: Decoupled subsidies, capitalization, land market, income distributional effects, selection bias, GPS, Agricultural and Food Policy, Land Economics/Use,
    Date: 2014–09
  19. By: López-Mosquera, Natalia; Álvarez-Coque, José María García; Sánchez, Mercedes
    Abstract: The paper underlines the importance of adopting a ‘market-orientation’ strategic approach in order to improve the performance of the firms, previously influenced by the ‘adoption of innovations’ of interest to the agricultural firms in two Spanish regions. The methodology selected has been a Multi-Group Structural Equation Modelling applied to the data obtained by personal interviews to a sample of farmers. Agricultural producers are more oriented, from the market point of view, to their regular customers and to controlling the quality of their production. The results also show a positive impact of market orientation activities on the performance to all firms.
    Keywords: strategic decisions, market orientation, adoption of innovation, SEM multigroup analysis, firm performance, Research and Development/Tech Change/Emerging Technologies,
    Date: 2014–08
  20. By: Roberto Zotti (University of Salerno)
    Abstract: A strong incentive for studying the dropout phenomenon in the context of Italian tertiary education, both from the positive standpoint and from the regulatory one, is because higher education institutions are evaluated and then financially supported also on the base of parameters such as the dropout rate, especially between the first and the second year. An econometric analysis of factors that affect the decision to drop out has been made, using administrative data on students enrolled in post-reform courses at University of Salerno in the academic year 2003/2004. Focusing on very detailed individual information, the database allows to take into account changes in university attendance decisions year by year and to provide a precise identification of the students who drop out. Moreover a non-selective entrance test score has also been taken into account in order to understand weather it could successfully predict and reduce dropout rates. Evidence that the pre-enrollment characteristics and performances play an important role on the students’ decision to drop out has been found out. Moreover, the students’ non-selective entrance test scores seem to be a good signal of the students’ ability. They could well predict the student’s future performances suggesting their use to improve the matching between students and their individual specific curricula.
    Keywords: Probit estimation; Student drop-out (non-completition) probabilities; University performance; Selective entry test
    JEL: I20 I21 I23
    Date: 2015–01

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