nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒03‒27
twenty papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Has Subjective General Health Declined with the Economic Crisis? A Comparison across European Countries By Kevin Denny
  2. The joint decision of labour supply and childcare in Italy under costs and availability constraints By Francesco Figari; Edlira Narazani
  3. Immigrants' Effect on Native Workers: New Analysis on Longitudinal Data By Mette Foged; Giovanni Peri
  4. Towards a Multidimensional Poverty Index for Germany By Nicola Suppa
  5. The Burden of Germany’s Energy Transition – An Empirical Analysis of Distributional Effects By Manuel Frondel; Stephan Sommer; Colin Vance
  6. Debt concentration of European Firms By Giannetti, Caterina
  7. Analysing and Managing Urban Sprawl and Land Take By BENCARDINO, Massimiliano; IOVINO, Giorgia
  8. Lower coverage but stronger unions? Institutional changes and union wage premia in central Europe By Iga Magda; David Marsden; Simone Moriconi
  9. Women on the board and executive duration: Evidence for European listed firms By Buchwald, Achim; Hottenrott, Hanna
  10. Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets By Black, Sandra E.; Devereux, Paul J.; Lundborg, Petter; Majlesi, Kaveh
  11. Legal and institutional determinants of factoring in SMEs: Empirical analysis across 25 European countries By Ginés Hernández-Cánovas; Ana Mol-Gómez-Váquez; Johanna Koëter-Kant
  12. Export behaviour of SMEs in the Swedish computer service industry By Falk, Martin; Hagsten, Eva
  13. Bargaining or efficiency within the household? The case of Italy By AINA, Carmen; MAZZOTTA, Fernanda; PARISI, Lavinia
  14. The many dimensions of child poverty: Evidence from the UK Millennium Cohort Study By Andrew Dickerson; Gurleen Popli
  15. Can Risk Averse Households Make Risky Investments? The Role of Trust in Others By Alessandro Bucciol; Barbara Cavasso; Luca Zarri
  16. You've come a long way, baby. Effects of commuting times on couples' labour supply By Francesca Carta; Marta De Philippis
  17. Employment protection legislation and labor court activity in Spain By Juan F. Jimeno; Marta Martínez-Matute; Juan S. Mora-Sanguinetti
  18. Crowding (out) the retirees? RDD application to raising effective retirement age in Poland By Paweł Strzelecki; Joanna Tyrowicz
  19. A risk perspective on market integration and the reform of support of renewables in Germany By Pahle, Michael; Schweizerhof, Henriette
  20. An Attempt to Disperse the Italian Interlocking Directorship Network: Analyzing the Effects of the 2011 Reform By Carlo Drago; Roberto Ricciuti; Paolo Santella

  1. By: Kevin Denny (University College Dublin)
    Abstract: This note examines whether subjective general health in Europe has changed since the onset of the economic crisis. Subjective general health for Ireland, Spain and Portugal is compared before and after the onset of the recession. Two other European economies, Germany and United Kingdom, are also examined. The change in the proportion of respondents reporting good or very good health is also plotted against the change in the unemployment rate over the period 2007-2012. Subjective general health improves slightly in countries experiencing sharp recessions. Across European countries there is no link between changes in subjective general health and in unemployment: no evidence is found to suggest that the Great Recession has worsened morbidity in Europe.
    Keywords: unemployment, recession, health, Europe, morbidity
    JEL: I18 J60
    Date: 2015–03–20
  2. By: Francesco Figari; Edlira Narazani
    Abstract: It is widely recognized that childcare has important pedagogical, economic and social effects on both children and parents. This paper is the first attempt to estimate a joint structural model of labour supply and childcare decision applied to Italy. Such an approach is particularly informative given that it allows one to estimate the changes in family choices under different policy simulation scenarios, evaluating the effects on labour supply and childcare usage and the potential consequences for household income.We analyse how maternal labour supply and childcare usage can be affected by relaxing the existing constraints in terms of childcare availability and costs by considering public, private and informal childcare, with related imputed availability and costs and their interaction with the whole tax-benefit system.Due to the regional differences, costs and effects are highly differentiated among different areas of the country. Results suggest that Italian households might alter their childcare and labour supply decisions substantially if the coverage rate of formal childcare increases, in particular if the increase would correspond to the increase needed to reach the European target in the Southern regions. Overall, increasing child care coverage is estimated to be more effective in enhancing labour incentives than decreasing existing child care costs, at the same budgetary cost. However, the potential effects on the disposable income are larger in the latter scenario because decreasing the childcare costs is beneficial also for women who do not change their labour supply behaviour.
    Keywords: childcare, female labour market participation, labour supply, Italy
    JEL: H53 J13 J22 I38
    Date: 2015–03
  3. By: Mette Foged (University of Copenhagen); Giovanni Peri (UC Davis)
    Abstract: Using longitudinal data on the universe of workers in Denmark during the period 1991-2008 we track the labor market outcomes of low skilled natives in response to an exogenous inflow of low skilled immigrants. We innovate on previous identification strategies by considering immigrants distributed across municipalities by a refugee dispersal policy in place between 1986 and 1998. We find that an increase in the supply of refugee-country immigrants pushed less educated native workers (especially the young and low-tenured ones) to pursue less manual-intensive occupations. As a result immigration had positive effects on native unskilled wages, employment and occupational mobility.
    Keywords: Refugees, dispersal policy, manual skills, employment, wages
    JEL: F22 J24 J61
    Date: 2015–03
  4. By: Nicola Suppa
    Abstract: This paper compiles a multidimensional poverty index for Germany. Drawing on the capability approach as conceptual framework, I apply the Alkire-Foster method using German panel data. I suggest new operationalizations for two dimensions: social participation and practical reason, the latter drawing on recent findings in experimental economics. The results are consistent with earlier findings, but also reveal several new insights. Specifically, numerous decompositions of the poverty index prove helpful in better tracking and understanding developments. Moreover, I find poor individuals to be adversely affected by general trends in deprivation indicators. Comparing multidimensional and income-based methods, I find only a modest overlap of people considered as poor by both approaches. Moreover, I address the role of income as a dimension in multidimensional poverty indices.
    Keywords: Multidimensional poverty; Alkire-Foster method; capability approach; SOEP
    JEL: I3 I32 D63 H1
    Date: 2015–02
  5. By: Manuel Frondel; Stephan Sommer; Colin Vance
    Abstract: Germany’s energy transition has been accompanied by a near doubling of power prices for private households since the outset of the new millennium. Millions of poor households and those that are close to the poverty threshold are likely to suffer from these increases in electricity cost. Focusing on low-income households, this paper illustrates the distributional implications of Germany’s energy transition by investigating their electricity cost burden between 2006 and 2012, using data from the German Residential Energy Consumption Survey (GRECS). Our estimates suggest that in 2012, on average, households at poverty risk allocated 5.5% of their income to power and, hence, paid nearly as much for covering their electricity consumption as for heating purposes. Given Germany’s ambitious targets to expand the share of costly renewable technologies in electricity consumption, which has broad support among the electorate, it is to be expected that households’ expenditure for power will increase in the upcoming years. This raises the urgent question of how to mitigate the regressive impact of further increasing electricity prices on poor households. Direct cash transfers are suggested here as a non-distortionary instrument for easing the burden of high prices, one that is directly targeted at those endangered by energy poverty.
    Keywords: Energy transition; feed-in tariff; German Residential Energy Consumption Survey
    JEL: Q21 Q28 Q47
    Date: 2015–02
  6. By: Giannetti, Caterina
    Abstract: This paper investigates the level of debt specialization across European firms relying on a cross-country comparable sample of manufacturing firms. We find that a number of firm characteristics -- such as firm size and age -- help predict the firm composition of the various types of debts (i.e. debt specialization) but not the level of each debt share. In particular, we observe that small and young firms have a more concentrated debt structure (i.e. they rely on few types of debt). However, these relationships are not linear and seem to be U-shaped. We also find that Spanish firms have the most diversified debt structure, and that diversified firms are less likely to experience a severe reduction in turnover.
    Keywords: Debt specialization, European firms, Firm financing
    JEL: F20 G32
    Date: 2015–03–12
  7. By: BENCARDINO, Massimiliano (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); IOVINO, Giorgia (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: In this paper «land take» and its drivers within the urbanization process is studied with a focus on recent developments in Italy. Several sources of information, recently made available by national and European agencies, are used to highlight the main characteristics of land take, its determinants, its spatial pattern and its evolutionary trends. Finally, after a short review of initiatives, actions and policies designed and implemented at different institutional levels (local, national, European) to tackle the question of urban sprawl and land take, we focus on some critical issues such as: reliability of measurement, scale of spatial planning, policy coordination and re-distributional aspects arising from the regulation of land property and rent.
    Keywords: Land take; Urban sprawl; Spatial planning; Italy
    JEL: Q01 Q24 Q28
    Date: 2014–12–30
  8. By: Iga Magda; David Marsden; Simone Moriconi
    Abstract: In this paper we use the national samples from the European Structure of Earnings Survey (ESES) to analyze the evolution of the wage premium of firm- and industry-level agreements in the Czech Republic, Hungary, and Poland (the CE3) around the time of their accession to the EU. We find that despite a generalized reduction in union coverage in these countries, the union wage premium after accession to the EU became bigger and statistically more significant. This is particularly the case for Poland and Hungary, where in the years immediately following EU accession a wage premium associated with industry-level agreements emerged which mostly applied to low-income workers ages 30 and older. We interpret these findings in terms of the institutional reforms that occurred in the CE3 between 2002 and 2006. These reforms, which were prompted by the EU Commission’s requirements for EU accession, increased the social partners' ability to bargain and enforce wage agreements, and made industry-level unions more effective in guaranteeing the protections provided by labor standards.
    Keywords: institutional change, unions, wages
    JEL: J51 J31 P2
    Date: 2015–03
  9. By: Buchwald, Achim; Hottenrott, Hanna
    Abstract: The participation of women in top-level corporate boards (or rather the lack of it) is subject to intense public debate. Several countries are considering legally binding quotas to increase the share of women on boards. Indeed, research on board diversity suggests positive effects of gender diverse boards on corporate governance and even firm performance. The mechanism through which these benefits materialize remain however mostly speculative. We study boards of directors in a large sample of listed companies in 15 European countries over the period 2003-2011 and find that female representation on firms' non-executive boards is associated with reduced turnover and an increase in tenure of executive board members. An increase in the performance-turnover sensitivity of executives suggests that this effect may be explained by better monitoring practices rather than by less effective control or a 'taste for continuity'.
    Keywords: Corporate Governance,Executive Turnover,Gender,TMT Diversity
    JEL: G34 J24 J63 L25 M00
    Date: 2015
  10. By: Black, Sandra E. (Department of Economics, University of Texas, Austin); Devereux, Paul J. (School of Economics and Geary Institute, University College Dublin); Lundborg, Petter (Department of Economics, Lund University); Majlesi, Kaveh (Department of Economics, Lund University)
    Abstract: We investigate whether acquiring more education when young has long-term effects on risk-taking behavior in financial markets and whether the effects spill over to spouses and children. There is substantial evidence that more educated people are more likely to invest in the stock market. However, little is known about whether this is a causal effect of education or whether it arises from the correlation of education with unobserved characteristics. Using exogenous variation in education arising from a Swedish compulsory schooling reform in the 1950s and 1960s, and the wealth holdings of the population of Sweden in 2000, we estimate the effect of education on stock market participation and risky asset holdings. We find that an extra year of education increases stock market participation by about 2% for men but there is no evidence of any positive effect for women. More education also leads men to hold a greater proportion of their financial assets in stocks and other risky financial assets. We find no evidence of spillover effects from male schooling to the financial decisions of spouses or children.
    Keywords: Portfolio choice; Asset allocation; Returns to education; Risk-taking; Investment behavior
    JEL: D14 D31 G11 I24
    Date: 2015–03–23
  11. By: Ginés Hernández-Cánovas (Universidad Politécnica de Cartagena); Ana Mol-Gómez-Váquez (Universidad Politécnica de Cartagena); Johanna Koëter-Kant (Vrije Universiteit Amsterdam)
    Abstract: We use a survey data set of 4348 SMEs from 25 European countries to analyze the association between the use of factoring as a form of SME financing and the legal environment of the country where in which they operate. Our findings indicate that firms operating in countries with legal environments that weakly protect the rights of creditors, such as those under French-civil-law, with political instability or high enforcement costs, are more likely to use factoring. We hypothesize that in such environments bank financing could be more restricted and factoring might be an alternative source to alleviate SMEs financing constraints. In line with this argument, we find that firms experiencing some financing difficulties are more likely to use factoring. We also show that the likelihood of using factoring increases for firms located in growing economies. Factoring might be a means for these firms to finance the enlargement of their business activity. (Ginés Hernández-Cánovas acknowledges financial support by Fundación Séneca (Project 15403/PHCS/10), and by Ministerio de Ciencia e Innovación (Project ECO2011-29080)
    Keywords: Factoring, SMEs financing, financial constraints, legal system.
    JEL: G00 G30 G32
    Date: 2014–07
  12. By: Falk, Martin; Hagsten, Eva
    Abstract: Export participation of SMEs in Swedish computer services has increased rapidly over the last decade. Despite the increase, export participation rates of SMEs including micro enterprises remain rather low at 13 percent in 2010. Based on uniquely linked firm-level datasets with full coverage of micro enterprises and sole proprietors, this study investigates the determinants of export participation of Swedish SMEs in the computer service industry. Exports include both goods and services. Estimates based on the conditional logit model show a significantly positive relationship between initial labour productivity and the decision to export. An interesting and new finding is that the magnitude of the relationship between the probability to export and initial labour productivity is low once firm effects are controlled for. Surprisingly, the impact of labour productivity on exporting does not differ between micro enterprises and the remaining SMEs (10-249 employees). Furthermore, skill intensity is significantly related to the probability of exporting with low marginal effects. Overall, labour productivity and skill intensity only explain a small proportion of the export boom of Swedish software SMEs.
    Keywords: exports,productivity,computer service industry,human capital,conditional logit model
    JEL: F14
    Date: 2015
  13. By: AINA, Carmen (Università degli Studi del Piemonte Orientale); MAZZOTTA, Fernanda (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); PARISI, Lavinia (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: Two aspects play a role in the household decision-making, the efficiency and the bargaining power’s argument. The crucial difference between the two approaches is the expected influence of personal and partners’ wage. To investigate which of the two models hold, in the Italian context, we estimate an ordered probit model for five aspects of household decision-making. We use the Italian questionnaire of Statistics on Income and Living Conditions (It-Silc) 2010 as it provides a module on intra-household sharing of resources. Results show that in strategic control decisions, where the power argument should dominate the efficiency approach (i.e. decisions on durable goods, savings and other important decisions) the spouse/partner with higher wage is the household decision maker. For decision regarding executive management (i.e. decision on everyday shopping), the efficiency argument holds.
    Keywords: Financial management; Intra-household bargaining; Household production; Gender differences; Intra-household decision power; Family economics
    JEL: D13 E21 G11 J12
    Date: 2014–12–30
  14. By: Andrew Dickerson (Department of Economics, University of Sheffield); Gurleen Popli (Department of Economics, University of Sheffield)
    Abstract: In this paper we use a multidimensional framework to characterise child poverty in the UK. We examine the interdependencies amongst the different dimensions of multidimensional poverty, and the relationship of multidimensional poverty with income poverty. We also explore the links between multidimensional poverty, income poverty, and children's cognitive and non-cognitive development. Our findings suggest that multidimensional poverty identifies many but not all of the same children classified using standard income poverty measures, although multidimensional poverty is rather more persistent over time than income poverty. Multidimensional poverty also has a detrimental impact on children's development over and above the negative impact of income poverty.
    Keywords: child poverty; multidimensional poverty; income poverty; child development
    JEL: I32 J13 J62
    Date: 2015–03
  15. By: Alessandro Bucciol (Department of Economics (University of Verona)); Barbara Cavasso (University of Padua); Luca Zarri (Department of Economics (University of Verona))
    Abstract: Using the 2006 wave of the Survey on Health, Ageing and Retirement in Europe (SHARE), this paper sheds light on the role jointly played by individuals’ financial risk tolerance and their level of trust in others (generalized trust) in affecting their risky assets investments. We document that large variation in risk tolerance and trust exists across European countries and households and we show that risky assets investments are more frequent and larger in households featuring either risk tolerance or (to a smaller extent) a combination of risk aversion and trust. Trust thus acts as a substitute (albeit an imperfect one) for risk tolerance. Our findings have implications for our understanding of heterogeneity in household financial decisions as well as of the role that trust can play as a lubricant of the economic system.
    Keywords: Portfolio Choice; Risk Tolerance, Generalized Trust
    JEL: D14 D03 G11 D81
    Date: 2015–03
  16. By: Francesca Carta (Bank of Italy); Marta De Philippis (Bank of Italy)
    Abstract: This paper explores the effects of husbands' commuting time on their wives' labour market participation and on family time allocation. We develop a unitary family model of labour supply, which includes commuting times and household production. In a pure leisure model longer commuting time for husbands increases their wives' labour market participation and reduces their own working hours. However, a model that includes household production might determine the exact opposite result. We then examine the sign of these effects by using data from the German Socio-Economic Panel from 1997 to 2010. Employer-induced changes in home to work distances allow us to deal with endogeneity of commuting times. We find that a 1% increase in a husband's commuting distance reduces his wife's probability of participating in the labour force by 1.7 percentage points, 2% over the mean. Moreover, it increases his working hours by 0.2 hours per week. The average effect masks substantial heterogeneity: lower participation rates are concentrated in couples with children and where the husband has higher levels of education.
    Keywords: household production, gender economics, time allocation and labour supply, commuting time
    JEL: D13 J16 J21 J22
    Date: 2015–03
  17. By: Juan F. Jimeno (Banco de España); Marta Martínez-Matute (Banco de España); Juan S. Mora-Sanguinetti (Banco de España)
    Abstract: Labor courts may introduce a significant wedge between “legal” firing costs and “effective” (post-trial) firing costs. Apart from procedural costs, there is uncertainty over judges’ rulings, in particular over the likelihood of a “fair” dismissal ultimately being ruled as “unfair”, which may increase firing costs significantly. In 2010 and 2012, reforms of Employment Protection Legislation widened the definition of fair economic dismissals in Spain. In this paper we look at Labor Court rulings on dismissals across Spanish provinces before and after the EPL reforms (2004-2014). We make this comparison taking into account a set of co-variates (local labor market conditions, characteristics of the Labor Courts, pre-trial conciliations, congestion of Labor Courts) which may determine the selection of dismissal cases ruled by Labor Courts. Our results suggest that, despite the 2010 and 2012 EPL reforms, the proportion of economic redundancies being ruled as fair by Labor Courts has not substantially increased, although it is now less negatively associated with the local unemployment rate than in the pre-reform period.
    Keywords: employment protection legislation, firing costs, unemployment.
    JEL: J52 J53 K31 K41
    Date: 2015–03
  18. By: Paweł Strzelecki (Warsaw School of Economics; National Bank of Poland); Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland)
    Abstract: As of 2007 increased labor force participation of the elderly has been observed in Poland. In 2009 a reform in the eligibility criteria narrowed the scope of early retirement opportunities for majority of the occupations. While labor force participation in the directly affected cohorts continued to grow, but an increase already prior to the reform hints that other factors may have been at play as well. The objective of this paper is to isolate and evaluate the causal ef-fect of the changes in eligibility criteria on labor force participation and exit to retirement of the affected cohorts. We rely on Polish Labor Force Survey and employ regression disconti-nuity design to evaluate the change in participation subsequent to the eligibility reform among the treated cohorts. We find a statistically significant, but economically small discontinuity at the timing of the reform. The placebo test shows no similar effects in earlier or later quarters. Yet, the pure treatment effects are insignificant in vast majority of the specification. Our con-clusions are thus as follows: the changes in the eligibility criteria were not instrumental in fostering the participation rates among the affected cohort, i.e. the immediate contribution to increased labor force participation of these cohorts is not economically large.
    Keywords: retirement age, early retirement, regression discontinuity, Poland
    JEL: J14 J26
    Date: 2015
  19. By: Pahle, Michael; Schweizerhof, Henriette
    Abstract: After more than a decade of supporting power from renewable energy (RE) through guaranteed feed-in tariffs, the German Government has initiated reforms to integrate RE into the market. To eventually achieve market integration requires that RE investors carry power market risks, in particular the power price risk. At the same time however, under the current financial structure higher risks are likely to have a negative impact on the bankability of new RE projects, which by extension may endanger further deployment and the achievement of renewable targets with it. Against this background we take a risk perspective to assess the past and upcoming EEG reforms, with the aim of developing a proposal to gradually shift risk towards RE investors without endangering project finance. To that end we first discuss the case for more market risk and classify the specific respective risks for RE, analyze how they have been allocated so far, and find that past policy reforms have initiated only a marginal transfer of revenue risks to renewables. On that basis we argue that more ambitious steps in this direction need to be taken, for which regulatory complexity and reform outcome uncertainty suggest a continuous and transparent transition rather than a grand all-at-once intervention. We outline and discuss two elements that could be at the center of it: First, a support framework that creates incentives for RE projects to increasingly take risks, for which we propose a cascading risk auction mechanism that prioritizes “more risky” projects. Second, design options for (a) “more risky” support contracts and (b) risk transfer in power purchase contracts, which if standardized could help to develop and establish suitable risk mitigation and management approaches on the side of financers. While this paper does not deliver a fully spelled-out action plan for these elements, it provides a basic sketch and identifies the main research gaps that should be filled for implementing it. Giving the long lead times of reforms and the need to think ahead that arises from it, we are sure that this proposal can make an important contribution to the next EEG reform in Germany expected for 2016/2017.
    Keywords: Germany,renewable support,risk
    JEL: D81 Q28 Q42 Q58
    Date: 2015–02
  20. By: Carlo Drago (Department of Economics (University of Verona)); Roberto Ricciuti (Department of Economics (University of Verona)); Paolo Santella (ESMA)
    Abstract: The purpose of this paper is to analyze the effects on the Italian directorship network of the corporate governance reform that was introduced in Italy in 2011 to prevent interlocking directorships in the financial sector. Interlocking directorships are important communication channels among companies and may have anticompetitive effect. We apply community detection techniques to the analysis of the networks in 2009 and 2012 to ascertain the effect of the reform. We find that, although the number of interlocking directorships decreases in 2012, the reduction takes place mainly at the periphery of the network whereas the network core is stable, allowing the most connected companies to keep their strategic position.
    Keywords: interlocking directorships, corporate governance, community detection, social networks
    JEL: C33 G34 G38 L14
    Date: 2015–03

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