nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒07‒25
eighteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. A fresh look at an old question: is pro-poor targeting of cash transfers more effective than universal systems at reducing inequality and poverty? By Abigail McKnight
  2. A Coordinated Strategic Reserve to Safeguard the European Energy Transition By Karsten Neuhoff; Jochen Diekmann; Friedrich Kunz; Sophia Rüster; Wolf-Peter Schill; Sebastian Schwenen
  3. Family-related employment interruptions and self-employment of women: Does policy matter? By Suprinovič, Olga; Schneck, Stefan; Kay, Rosemarie
  4. Do Hiring Credits Work in Recessions?: Evidence from France By Pierre Cahuc; Stéphane Carcillo; Thomas Le Barbanchon
  5. European Identity and Redistributive Preferences By Joan Costa-Font; Frank Cowell
  6. How does fiscal decentralization affect within-regional disparities in well-being? Evidence from health inequalities in Italy By Cinzia Di Novi; Massimiliano Piacenza; Silvana Robone; Gilberto Turati
  7. A note on social capital, space and growth in Europe By Luciano Lavecchia
  8. Effects of geographical accessibility on the use of outpatient care services: quasi-experimental evidence from panel count data By Peter Elek; Balazs Varadi; Marton Varga
  9. Do family values shape the pace of return to work after childbirth? By Mireia Borrell-Porta
  10. Act Now: The Effects of the 2008 Spanish Disability Reform By Matthew J. Hill; Jose Silva; Judit Vall
  11. Smart and sustainable cities in the European Union. An ex ante assessment of environmental, social, and cultural domains By Dorel N Manitiu; Giulio Pedrini
  12. Internet and taxation in the European Union: A primer By Luigi Bernardi
  13. Free movement of labour in Europe: a solution for better labour allocation? By Janine Leschke; Béla Galgóczi
  14. The Ends Against the Middle. Attitudes Towards Taxation By Ana I. Moro Egido; Angel Solano Garcia
  15. Growing Together? Projecting Income Growth in Europe at the Regional Level By Jesus Crespo Cuaresma; Gernot Doppelhofer; Florian Huber; Philipp Piribauer
  16. Flexible Short-Term Power Trading: Gathering Experience in EU Countries By Karsten Neuhoff; Carlos Batlle; Gert Brunekreeft; Christos Vasilakos Konstantinidis; Christian Nabe; Giorgia Oggioni; Pablo Rodilla; Sebastian Schwenen; Tomasz Siewierski; Goran Strbac
  17. The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure By Deborah Goldschmidt; Johannes F. Schmieder
  18. The Optimal Timing of UI Benefits: Theory and Evidence from Sweden By Kolsrud, Jonas; Landais, Camille; Nilsson, Peter; Spinnewijn, Johannes

  1. By: Abigail McKnight
    Abstract: This paper presents findings on the changing effectiveness of cash transfers and income taxes on inequality and poverty reduction in four EU countries - the UK, Italy, Sweden and France. We use long time series (spanning four decades) to examine trends within countries over time and between countries at different points in time. Recent evidence has suggested that the relationship between concentration of cash transfers and their redistributive effectiveness has become blurred over time. We find much more conclusive evidence of a negative relationship within countries over time. The results show a negative relationship between the concentration of cash transfers net of direct taxes and their effectiveness in terms of reducing poverty and inequality. The strength of the relationship varies between countries and in some cases between the all age and the working age populations. The evidence suggests that caution should be applied to relying on bivariate cross-country estimates and that more should be done to establish and verify empirical relationships within countries over time using the rich data sources that are now available. These findings re-open the debate on the most effective design of cash transfer and direct tax systems.
    Keywords: Inequality, poverty, redistribution, cash transfers, welfare
    JEL: I32 H23 D31
    Date: 2015–07
  2. By: Karsten Neuhoff; Jochen Diekmann; Friedrich Kunz; Sophia Rüster; Wolf-Peter Schill; Sebastian Schwenen
    Abstract: In Germany and beyond, various capacity mechanisms are currently being discussed with a view to improving the security of electricity supply. One of these mechanisms is a strategic reserve that retains generation capacity for use in times of critical supply shortage. We argue that strategic reserves have specific advantages compared to other capacity mechanisms in the context of the European energy transition. To date, however, the debate on capacity mechanisms has largely been restricted to national contexts. Against this background, we discuss the feasibility and potential benefits of coordinated cross-border strategic reserves to safeguard electricity supply and aid the energy transition in Germany and neighboring countries at large. Setting aside strategic reserve capacity which is deployed only in the event of extreme supply shortages could improve the security of electricity supply without distorting the EU’s internal electricity market. In addition, overall costs may decrease when reserve procurement and activation are coordinated among countries, particularly if combined with flow-based market coupling.
    Keywords: Capacity mechanisms, strategic reserve, market design, energy policy, energy transition
    JEL: L51 Q48
    Date: 2015
  3. By: Suprinovič, Olga; Schneck, Stefan; Kay, Rosemarie
    Abstract: This paper analyzes how statutory entitlements to maternity or parental leave affect female entry into self-employment after childbirth. For our estimations we use comprehensive panel data for German adults born between 1944 and 1989. We find that utilization of statutory parental leave decreases women's probability to switch into self-employment. This effect is statistically significant for start-ups in highskilled occupations. In contrast, start-ups in low-skilled occupations are not significantly affected by statutory parental leave.
    Abstract: Der Aufsatz untersucht, wie sich familienbedingte Erwerbsunterbrechungen auf die Gründungsneigung von Frauen auswirken. Hierfür wurden Paneldaten für die Erwachsenenbevölkerung in Deutschland (Geburtsjahrgänge 1944 bis 1989) ausgewertet. Das Ergebnis: Gesetzlich geregelte familienbedingte Auszeiten reduzieren signifikant die Wahrscheinlichkeit, dass eine Frau sich in einem hochqualifizierten Tätigkeitsbereich selbstständig macht. Für Gründungen in den gering qualifizierten Bereichen konnte ebenfalls ein negativer, jedoch nicht signifikanter Effekt solcher Erwerbsunterbrechungen nachgewiesen werden.
    Keywords: family policy,parental leave,women's self-employment
    JEL: J16 J18 L26 M13
    Date: 2015
  4. By: Pierre Cahuc (Department of Economics); Stéphane Carcillo (Departement d'Economie de Sciences Po); Thomas Le Barbanchon (Centre de Recherche en Économie et Statistique (CREST))
    Abstract: This paper evaluates the impact of an unexpected temporary hiring credit targeted at workers paid below 1.6 times the minimum wage in firms with less than 10 employees in France from December 2008 to December 2009. Using rich administrative data covering all French firms, we find that the program has had a strong and rapid impact on employment. The net cost per job created for the government was around zero. The employment effect was stronger in areas where recruitment was easier. Although the hiring credit was not conditional on net job creation, it did not increase churning of workers. Nevertheless, we estimate that a credit conditional on net job creation above the employment growth threshold of -1%, would have maximized job creation, and created about 4 times more jobs, at constant budget, provided that take-up had remained the same.
    Keywords: Hiring Credit; Labor Demand
    JEL: C31 C93
    Date: 2014–07
  5. By: Joan Costa-Font; Frank Cowell
    Abstract: How important is spatial identity in shifting preferences for redistribution? This paper takes advantage of within-country variability in the adoption of a single currency as an instrument to examine the impact of the rescaling of spatial identity in Europe. We draw upon data from the last three decades of waves of the European Values Survey and we examine the impact of joining the single currency on preferences for redistribution. Our instrumentation strategy relies on using the exogenous effect of joining a common currency, alongside a battery of robustness checks and alternative instruments. Our findings suggest that joining the euro has a boosting effect on European identity; an opposite and comparable effect is found for national pride. We find that European identity increases preferences for redistribution, and that national pride exerts an equivalent reduction in preferences for redistribution.
    Keywords: Spatial identity, Europe, welfare state support
    JEL: D69 O52 H53
    Date: 2015–07
  6. By: Cinzia Di Novi (Department of Economics, University Of Venice Cà Foscari, Italy); Massimiliano Piacenza (University of Torino, Department of Economics, Social Sciences, Applied Mathematics and Statistics (ESOMAS), Italy; Italian National Research Council, Research Institute on Sustainable Economic Growth (CNR-IRCrES), Moncalieri (TO), Italy.); Silvana Robone (University of Insubria, Department of Economics, Italy;); Gilberto Turati (University of Torino, Department of Economics, Social Sciences, Applied Mathematics and Statistics (ESOMAS), Italy)
    Abstract: This paper aims at investigating empirically the impact of fiscal decentralization reforms on inequality in well-being. In particular, we look at the effects on health inequalities following the assignment of larger tax power to the Italian Regions for financing their health expenditure, starting from the end of the Nineties. Exploiting large differences in the size of the tax base across Regions, we find that fiscal decentralization processes that attribute a greater tax power to lower government tiers, besides reducing inefficiencies of healthcare policies, seem to be effective in reducing also within-regional disparities in health outcomes. However, the degree of economic development – on which depends the actual fiscal autonomy from Central government – significantly affects the effectiveness of these reforms and highlights the importance to take properly into account the specific features of the context where the decentralization of power is implemented.
    Keywords: fiscal decentralization, regional governments, healthcare policy, health inequalities.
    JEL: H75 I14 I18 R50
    Date: 2015
  7. By: Luciano Lavecchia (Bank of Italy)
    Abstract: This note replicates the analysis of Tabellini (2010) on the relationship between social capital and regional economic growth in Europe, extending that work and the underlying dataset by focusing on the spatial dimension of social capital and introducing a definition of contiguity among European regions. We find a sizable and robust contribution of social capital to regional growth. We also estimate a Spatial autoregressive model with autoregressive disturbances (SARAR) and a Spatial Durbin Error model (SDEM). The results confirm the positive role of social capital, highlighting the importance of spatial spillovers, which warrants further discussion.
    Keywords: social capital, space, growth, Europe, sarar, sdem
    JEL: A13 O10 N13
    Date: 2015–07
  8. By: Peter Elek (Department of Economics, Eörvös Loránd University (ELTE), Budapest, Hungary); Balazs Varadi (Budapest Institute for Policy Analysis, Department of Economics - ELTE); Marton Varga (Department of Economics and Political Science, INSEAD)
    Abstract: In 2010-2012 new outpatient service locations were established in Hungarian micro-regions, which had lacked such capacities before. We exploit this quasi-experiment to estimate the effect of geographical accessibility on outpatient case numbers using both individual-level and semi-aggregate panel data. We find a 24-27 per cent increase of case numbers as a result of the establishments. Our specialty-by-specialty estimates imply that a one-minute reduction of travel time to the nearest outpatient unit increases case numbers e.g. by 0.9 per cent in internal care and 3.1 per cent in rheumatology. The size of the new outpatient capacities has a separate effect, raising the possibility of the presence of supplier-induced demand. By combining a fixed-effects logit and a fixed-effects truncated Poisson estimator, we decompose the effects into increases in the probability of ever visiting a doctor on the one hand and an increase of the frequency of visits on the other. We find that new visits were dominant in the vast majority of specialties, whereas both margins were important e.g. in rheumatology. Finally, we demonstrate the usefulness of the fixed-effects truncated Poisson estimator in modelling count data by examining its robustness by simulations.
    Keywords: Fixed-effects truncated Poisson regression, Hurdle models on count data, Number of doctor visits, Small area variation, Supplier-induced demand
    JEL: I11 I18 C23 C25
    Date: 2015–04
  9. By: Mireia Borrell-Porta
    Abstract: This paper evaluates the effect of a parental leave policy reform in Germany in 2007 - aimed at incentivizing an earlier return to work - on the return to work of mothers with different family values background. Using a regression discontinuity design and an epidemiological approach to family values, the findings suggest that the pace of return to work after childbirth is not independent of family values background. The paper finds that, firstly, the pre-reform pace of return to work was slower for mothers with traditional family background than for their counterparts with liberal family background. Secondly, the reform has accelerated the pace of return to work mainly for mothers with traditional family background, thus leading to overall convergence between mothers with different family values background. Importantly though, the magnitude of convergence differs across education levels. Mothers with vocational and – to a lesser extent - low education, display high levels of post-reform convergence with their counterparts with liberal family background. This is in stark contrast with the post-reform divergence on the pace of return to work experienced by highly educated mothers with different family values background. In other words, highly educated mothers with traditional family background do not react to the policy in a significant way, whereas those with liberal family background display a strong reaction. One explanation put forward by this paper is that education might be perceived differently depending on family values background. Mothers with traditional family background may use the educational system either as way to enhance their cultural investment or even as a marriage market, and therefore will not be very sensitive to changes in economic incentives. Instead, mothers with liberal family background may use the educational system as a way to enhance their human capital, therefore being more sensitive to changes in economic incentives.
    Keywords: parental leave, family values background, female labour supply, epidemiological approach
    Date: 2015–07
  10. By: Matthew J. Hill; Jose Silva; Judit Vall
    Abstract: We evaluate the effects of a reduction in the generosity of the Spanish disability system (DI) implemented in 2008. The reform reduced the benefits for individuals that have a short contributory history relative to their age, theoretically discouraging potential applicants to disability. However, due to the method used to calculate the extent of lost benefits, the reform actually introduced an incentive for individuals to apply for disability now. We use a life-cycle model with heterogeneous disabled workers to understand the potential impact of the reform and confirm the predictions of the model empirically. Our estimates show that the reform increased the probability of applying to DI by 33% for men. Consistent with the theoretical model, the effect is much stronger for individuals that lost their job in the previous period (83%).
    Keywords: disability benefits; life-cycle model; policy evaluation
    JEL: C33 I18 H51
    Date: 2015–07
  11. By: Dorel N Manitiu (Alma-Laurea Inter-University consortium; SDIC-School of Development Innovation and Change, Bologna (Italy)); Giulio Pedrini (Alma-Laurea Inter-University consortium; SDIC-School of Development Innovation and Change, Bologna (Italy))
    Abstract: The aim of the paper is to define a set of smartness and sustainability indicators applicable to European cities and to assess their outcome in an ex-ante perspective with regard to the implementation of Europe 2020 strategy. Following the DPSIR (Driving forces, Pressures, State, Impact, Response) model we select a bundle of indicators for three relevant sustainability domains (environmental, social, cultural), which are proper of the smart city definition. Then we define groups of homogeneous cities for each domain by using a two-step cluster analysis. Results show the existence of heterogeneous groups of cities that are likely to become smart in the cultural domain, side by side to groups of more developed urban areas that have acquired a substantial advantage in the environmental and social dimensions.
    Keywords: smartness, sustainability, urban areas, Europe 2020, DPSIR model
    JEL: Q01 R29
    Date: 2015–07
  12. By: Luigi Bernardi (Università di Pavia)
    Abstract: The purpose of this paper is to offer a primer on certain important features and issues concerning Internet and taxation in the European Union. After a general introduction concerning the origins of the matter, the paper discusses why a tax on the huge profits made by the big US digital MNEs in Europe was not substantially reflected in the tax policy of EU members, notwithstanding the large tax gap among EU countries resulting from the shift in profits by the (US digital) MNE towards lower or no taxation countries. Then the main directives on Internet and taxation introduced by the EU (and also by the OECD) since the late 1990s are discussed: the EU especially focusses on establishing the due place of taxation on electronic commerce, while the OECD (more recently together with the G20) has placed the emphasis on regulating Transfer Prices and contrasting Base Erosion and Profits’ Shifting (BEPS).
    Keywords: web tax, e-commerce, profits shifting, Europe, OECD
    JEL: H20 H24 H25 H26
  13. By: Janine Leschke; Béla Galgóczi
    Abstract: This Working Paper describes the main trends in post-enlargement east/west intra-EU labour mobility. It looks at how different population groups, nationals, EU8 and EU21 migrants have been affected by the turbulent processes of opening up national labour markets and subsequently by the crisis.
    Keywords: Employment, Migration
    Date: 2015–07
  14. By: Ana I. Moro Egido (Department of Economic Theory and Economic History, University of Granada.); Angel Solano Garcia (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: Recent tax evasion scandals have brought into question the progressivity of taxation in many EU countries. In this paper we analyze the effect of the concern about tax evasion on people’s attitudes towards taxation in EU countries. We find that concern about tax evasion may produce a U-shaped relationship between an individual’s income and preferences for taxation in line with recent theoretical studies. Moreover, we find that the perceived level of tax evasion, the perceived waste of public resources and the intensity of tax enforcement reduce public support for taxation. In contrast, concern about fairness in tax compliance favours it.
    Keywords: attitudes, taxation, tax evasion, multilevel models
    JEL: H3 H26
    Date: 2015–07–22
  15. By: Jesus Crespo Cuaresma (Department of Economics, Vienna University of Economics and Business); Gernot Doppelhofer (Norwegian School of Economics); Florian Huber (Oesterreichische Nationalbank); Philipp Piribauer (Department of Economics, Vienna University of Economics and Business)
    Abstract: In this paper we present an econometric framework aimed at obtaining projections of income growth in Europe at the regional level. We account for model uncertainty in terms of the choice of explanatory variables, as well as the nature of the spatial spillovers of output growth and human capital investment. Building on recent advances in Bayesian model averaging, we construct projected trajectories of income and human capital simultaneously, while integrating out the effects of other covariates. This approach allows us to assess the potential contribution of future educational attainment to economic growth and income convergence among European regions over the next decades. Our findings suggest that income convergence dynamics and human capital act as important drivers of income growth for the decades to come. In addition we find that the relative return of improving educational attainment levels in terms of economic growth appears to be higher in peripheral European regions.
    Keywords: Income projections, model uncertainty, spatial filtering, European regions
    JEL: C11 C15 C21 O52
    Date: 2015–07
  16. By: Karsten Neuhoff; Carlos Batlle; Gert Brunekreeft; Christos Vasilakos Konstantinidis; Christian Nabe; Giorgia Oggioni; Pablo Rodilla; Sebastian Schwenen; Tomasz Siewierski; Goran Strbac
    Abstract: Abstract EU power market design has been focused on facilitating trading between countries and for this has defined interfaces for market participants and TSOs between countries. The operation of power systems and markets within countries was not the focus of these developments. This may have contributed to difficulties of defining or implementing a common perspective in particular on intraday and balancing approaches. This motivated us to pursue an in depth reviewof six European power markets to contribute to a better understanding of the common elements, differences and the physical and institutional reasons for these. With this paper we aim to present the main insights emerging from the reviews and to identify where there is a need for alignment of operational aspects and short-term trading arrangements, taking into account system requirements individual member states face in operating their power system.
    Keywords: Electricity trading, Power system operation, Institutional analysis
    JEL: D40 D80 G24 L94
    Date: 2015
  17. By: Deborah Goldschmidt; Johannes F. Schmieder
    Abstract: The nature of the relationship between employers and employees has been changing over the last decades, with firms increasingly relying on contractors, temp agencies and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside of the boundary of lead employers to contracting firms. For this end we develop a new method for identifying outsourcing of food, cleaning, security and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10-15% relative to similar jobs that are not outsourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason why firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular showing that outsourcing of cleaning, security and logistics services alone accounts for around 10 percent of the increase in German wage inequality since the 1980s.
    JEL: J21 J23 J3 J31 J5 J81 L1 L11 L16 L22 L23 L24 M12 M13 M51 M52
    Date: 2015–07
  18. By: Kolsrud, Jonas; Landais, Camille; Nilsson, Peter; Spinnewijn, Johannes
    Abstract: This paper provides a simple, yet general framework to analyze the optimal time profile of benefits during the unemployment spell. We derive simple sufficient-statistics formulae capturing the insurance value and incentive costs of unemployment benefits paid at different times during the unemployment spell. Our general approach allows to revisit and evaluate in a transparent way the separate arguments for inclining or declining profiles put forward in the theoretical literature. We then estimate our sufficient statistics using administrative data on unemployment, income and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption determining the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. On average, savings and credit play a limited role in smoothing consumption. Our evidence therefore indicate that the recent change from a flat to a declining benefit profile in Sweden has decreased welfare. In fact, the local welfare gains push towards an increasing rather than decreasing benefit profile over the spell.
    Keywords: consumption smoothing; dynamic policy; sufficient statistics; unemployment
    JEL: H20 J64
    Date: 2015–07

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