nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2015‒10‒10
twenty-one papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Impact of the income tax relief for housing on household indebtedness in EU, 2004-2013 By Barbora Slintáková; Stanislav Klazar
  2. Is the depressive effect of renewables on power prices contagious? A cross border econometric analysis By Sébastien Phan, Fabien Roques
  3. Labor Force Activity after 60: Recent Trends in the Scandinavian Countries with Germany as a Benchmark By Larsen, Mona; Pedersen, Peder J.
  4. Moving to an Earnings-Related Parental Leave System - Do Heterogeneous Effects on Parents Make Some Children Worse Off? By Katrin Huber
  5. The dual approach for measuring. Multidimesional deprivation and poverty By Rolf Aaberge; Eugenio Peluso; Henrik Sigstad
  6. Your Move: The Effect of Chess on Mathematics Test Scores By Gumede, Kamilla; Rosholm, Michael
  7. Healthier lifestyles after retirement in Europe? Evidence from SHARE By Martina Celidoni; Vincenzo Rebba
  8. How do bankruptcy systems perform in Eastern Europe? By Régis BLAZY; Nicolae STEF
  9. Regional innovation system (in)efficiency and its determinants: an empirical evidence from Italian regions By Barra, Cristian; Zotti, Roberto
  10. The Youngest Get the Pill: ADHD Misdiagnosis and the Production of Education in Germany By Schwandt, Hannes; Wuppermann, Amelie
  11. Understanding the productivity slowdown. The importance of entry and exit of workers By Thomas von Brasch; Ådne Cappelen; Diana-Cristina Iancu
  12. Do IFRS Decrease Earnings Manipulation in European countries? By Tereza Miková
  13. The Effects of Immigration on NHS Waiting Times By Giuntella, Osea; Nicodemo, Catia; Vargas-Silva, Carlos
  14. Female employment and pre-kindergarten: on the uninteded effects of an Italian reform By Francesca Carta; Lucia Rizzica
  15. Intra-Household Commuting Choices and Local Labour Markets By Roberts, Jennifer; Taylor, Karl
  16. Measuring Youth Well-Being — options appraisal for a pan-European longitudinal survey By Aleksandrs Aleksandrovs; Ilze Koroleva
  17. E-Retailing and the Consumer Protection Bill, 2015: Drawing from the European Union Consumer Directives By Pathak, Akhileshwar
  18. The changing distribution of individual incomes in the UK before and after the recession By Eleni Karagiannaki; Lucinda Platt
  19. Household location and income: a spatial analysis for British cities By David Cuberes; Jennifer Roberts
  20. EU structural funds as a source of investment financing in Tri-City small and medium enterprises By Anna Golejewska
  21. Are Public or Private Providers of Employment Services More Effective? Evidence from a Randomized Experiment By Rehwald, Kai; Rosholm, Michael; Svarer, Michael

  1. By: Barbora Slintáková (University of Economics, Prague); Stanislav Klazar (University of Economics, Prague)
    Abstract: It is common that governments favour home ownership also via personal income taxation. Particularly deductibility of mortgage interest payments can stimulate households to borrow to acquire their dwellings. On the one hand the tax advantage can be effective at achieving social objectives, but on the other hand there is agreement that the housing taxation creates substantial distortion that may increase house prices and household leverage which may have adverse consequences on both micro- and macroeconomic levels. Our aim is to explore whether there is a relation between the advantageous tax treatment of housing and household indebtedness. We employ the multiple regression and pooled cross-sectional data for the former 15 EU member countries (except Greece) for the period 2004-2013. Our analysis reveals that the variable representing the extent of the tax relief on debt financing of the owner-occupied housing affected the variable reflecting indebtedness of European households between 2004 and 2013 positively.
    Keywords: Household indebtedness, Housing taxation, Mortgage interest deductibility
    JEL: G21 H24
  2. By: Sébastien Phan, Fabien Roques
    Abstract: European power markets have become more integrated and the implementation of market coupling has reinforced the efficiency of cross-border trading. This paper investigates empirically the impact of renewables growth in Germany on German and French power price volatility. We find that renewables depress power prices on average and increase volatility not only domestically but also across borders. We also leverage market resiliency data to investigate the impact of increases in interconnection capacity. We find that power price volatility would decrease in France despite some contagion effects of volatility from German renewables production. Our findings have important policy implications as they demonstrate the need to coordinate cross-border support policies for renewables in order to mitigate the impact of volatility on power prices in coupled power markets.
    Keywords: capital; electricity market, renewables, market coupling, GARCH
    JEL: L1 L5 L94
    Date: 2015–09–28
  3. By: Larsen, Mona (Danish National Centre for Social Research (SFI)); Pedersen, Peder J. (Aarhus University)
    Abstract: In most OECD member countries labor force attachment has increased in recent years in the 60+ group. Focus in the paper is on the development in this area in Denmark, Norway and Sweden since the 1990s. The development in the same period in the German labor market is included as a frame of reference. Main emphasis is given to the development in two distinct age groups, i.e. people in the first half of the 60s of which many are eligible for early retirement programs and people older than 65 mostly eligible for social security retirement programs. For these two age groups the actual development in labor force participation is described based on register data and on labor force surveys along with indicators of cohort relevant changes in education and health. Focus in the paper includes also the gender aspect to accommodate stronger cohort effects for women than for men. The impact on labor force participation from individual education and from self-assessed health is analyzed based on available micro data. Policy reforms and changes in the retirement area have been enacted since the mid-1990s in the included countries and more sweeping reforms are enacted or under review for the years ahead. We include a brief survey of policy changes in the Scandinavian countries and Germany as other determinants of labor force participation in the 60 and older group.
    Keywords: employment, older workers, health, education, program changes
    JEL: I15 I25 J14 J26
    Date: 2015–09
  4. By: Katrin Huber
    Abstract: Can moving to an earnings-related parental leave system influence children’s wellbeing and are heterogeneous effects on parents carried over to the entire family, making special groups of children worse off than others? To answer this question, this study exploits a large and unanticipated parental leave reform in Germany as a natural experiment. By replacing a means-tested by an earnings-related system the reform affected different groups of families to a variable extent. I detect significant negative effects on the personality of newborns whose families are subject to a nonpositive change in the overall benefit amount compared to the pre-reform situation. 2-3-year-old children belonging to the reform’s winners, however, improve their basic life skills and language skills
    Keywords: Children’s Well-Being, Parental Leave, Heterogeneous Effects
    JEL: J13 J18 J22
    Date: 2015
  5. By: Rolf Aaberge; Eugenio Peluso; Henrik Sigstad (Statistics Norway)
    Abstract: This paper is concerned with the problem of ranking and quantifying the extent of deprivation exhibited by multidimensional distributions, where the multiple attributes in which an individual can be deprived are represented by dichotomized variables. To this end we first aggregate deprivation for each individual into a distribution of deprivation count, representing the number of dimensions for which the population suffer from deprivation. Next, by drawing on the dual social evaluation framework that originates from Yaari (1987, 1988) social evaluation functions are used to construct summary measures of deprivation. Moreover, the measures of deprivation are proven to admit decomposition into the mean and the dispersion of the distribution of multiple deprivations. Two alternative criteria of second-degree count distribution dominance are shown to divide the family of dual measures of deprivation into two separate subfamilies, which differ with regard to whether concern is turned towards those people suffering from deprivation on all dimensions or those suffering from at least one dimension. To provide a normative justification of the dominance criteria we introduce alternative principles of association rearrangements, where the mean deprivation is assumed to be kept fixed. An empirical application based on data for 26 European countries illustrates the usefulness of the proposed framework and shows how different ethical views lead to different results.
    Keywords: Multidimensional deprivation; counting approach; partial orderings; dual measures of deprivation; principles of mean preserving association rearrangements.
    JEL: D31 D63 I32
    Date: 2015–10
  6. By: Gumede, Kamilla (Aarhus University); Rosholm, Michael (Aarhus University)
    Abstract: We analyze the effect of substituting a weekly mathematics lessons in primary school grades 1-3 with a lesson in mathematics based on chess instruction. We use data from the City of Aarhus in Denmark, combining test score data with a comprehensive data base from administrative register. We use a difference-in-differences approach to investigate treatment effects on the treated and tend to find positive effects. Looking at sub groups, we find significant positive effects for native Danish children, while we find no effects for children of immigrants.
    Keywords: mathematics and chess, primary school, learning
    JEL: I21 I28
    Date: 2015–09
  7. By: Martina Celidoni (University of Padova); Vincenzo Rebba (University of Padova)
    Abstract: This paper investigates changes in health behaviours upon retirement, using data drawn from the Survey of Health Aging and Retirement in Europe (SHARE). By exploiting changes in eligibility rules for early and normal retirement, we identify the causal effect of retiring from work on smoking, alcohol drinking, engagement in physical activity and visits to the general practitioner or specialist. We provide evidence about heterogeneous effects related to gender, education, net wealth, early-life conditions and job characteristics. Results show that changes in health behaviours occur upon retirement and may be a key mechanism through which the latter affects health. We find heterogenous effects related especially to gender, education and job characteristics.
    Keywords: retirement, health behaviour, fixed effects, instrumental variables.
    JEL: I12 J14 J26
    Date: 2015–09
  8. By: Régis BLAZY (LaRGE Research Center, Université de Strasbourg); Nicolae STEF
    Abstract: For post-socialist countries that have undertaken long phases of economic and judicial transitions, an important aspect of attractiveness is based on the performances of their bankruptcy systems. Those performances are all the more essential in a context of non-mature capital markets. Precisely, bankruptcy procedures should, first generate substantial recoveries for the whole set of investors, and second share those recoveries in an adequate way – e.g. in a way that improves the investors’ individual incentives (in terms of monitoring, control, support, etc.). This article uses an original hand-collected database of 554 closed bankruptcy cases in three Eastern European countries (Hungary, Poland, and Romania) to evaluate the determinants of bankruptcy systems’ performances during the post-transition era (from year 2003 to 2010/11). In particular, we investigate whether the specificities of these local bankruptcy environments are significant enough to influence the creditors’ total recoveries. We also wonder whether those recoveries are impacted by the presence of private/public creditors and/or the concentration of their claims. This paper goes beyond a mere analysis of the creditors’ overall repayment, by focusing on the competition effects between them. Implementing competition is actually a core issue for post-transition economies, which have to mimic rivalry effects that usually prevail in more mature market economies. Precisely, we measure the priority order of repayment among competing classes of creditors (public, social, and private claims) and investigate the nature of competition (rivalry vs. ripple effects) among these classes. (1) We first confirm that the design of bankruptcy law “matters”: the creditors’ repayment is not independent from the type of bankruptcy procedure, and depends on the national environment in which such procedure is engaged. (2) On all three countries, the total recoveries do not benefit from the presence of public claimholders, even when those are in position of being residual claimants. Following Satjer (2010), this result suggests some passivity from the state, which has lost bargaining power under bankruptcy. On the contrary, the private claimholders exert a contrasting influence on total recoveries: positive for the junior ones (more involved under bankruptcy, to compensate their lack of protection), and negative for the secured ones (confirming the “lazy argument” attached to collaterals). (3) We also find that repayments are lower when the claims are concentrated: despite easier coordination, concentration may generate excessive influence from the largest creditors, willing to run bankruptcy adjudicat ion in their sole interests. (4) We show that the Eastern European bankruptcy systems provide stronger protection for private secured claims than for public claims. From that angle, the post-socialist economies mimic the prioritization of secured creditors that characterizes most Western European bankruptcy systems. (5) Last, we confirm that Eastern European bankruptcy systems have successfully implemented competition among the classes of creditors, which we interpret as a sign of maturity.
    Keywords: bankruptcy;attractiveness;recoveries;transition economies.
    JEL: G33 K22 P34
    Date: 2015
  9. By: Barra, Cristian; Zotti, Roberto
    Abstract: This paper investigates the regional innovation system (RIS) efficiency, and its determinants, in Italy through a Stochastic Frontier Analysis and using the concept of a knowledge production function. The contribution of universities’, private and public sectors’ resources devoted to research and development (R&D), in generating innovation, has been examined, as well as the impact of several exogenous environmental variables on RIS efficiency. The empirical findings suggest the importance of R&D investments taking place in the universities and in the private sector, which benefit the most to regional innovation activities; labour market and industries’ characteristics are found to have an important role on RIS efficiency.
    Keywords: Regional innovation system, Technical efficiency. Knowledge production function
    JEL: C14 C67 O31
    Date: 2015–10–01
  10. By: Schwandt, Hannes (University of Zurich); Wuppermann, Amelie (University of Munich)
    Abstract: Attention Deficit/Hyperactivity Disorder (ADHD) is a leading diagnosed health condition among children in many developed countries but the causes underlying these high levels of ADHD remain highly controversial. Recent research for the U.S., Canada and some European countries shows that children who enter school relatively young have higher ADHD rates than their older peers, suggesting that ADHD may be misdiagnosed in the younger children due to their relative immaturity. Using rich administrative health insurance claims data from Germany we study the effects of relative school entry age on ADHD risk in Europe's largest country and relate the effects for Germany to the international evidence. We further analyze different mechanisms that may drive these effects, focusing on physician supply side and demand side factors stemming from the production of education. We find robust evidence for school-entry age related misdiagnosis of ADHD in Germany. Within Germany and internationally, a higher share of misdiagnoses are related to a higher overall ADHD level, suggesting that misdiagnoses may be a driving factor of high ADHD levels. Furthermore, the effects in Germany seem to be driven by teachers and parents in an attempt to facilitate and improve the production of education.
    Keywords: ADHD, misdiagnosis, age cutoff, education
    JEL: I1 I2 J1
    Date: 2015–09
  11. By: Thomas von Brasch; Ådne Cappelen; Diana-Cristina Iancu (Statistics Norway)
    Abstract: Many OECD countries have experienced a slowdown in measured labour productivity from 2005 and onwards. Norway is no exception in this respect. Most countries use a simple aggregate of hours worked when measuring labour productivity. One way to improve measurement of labour services is to control for worker characteristics. A theoretical rationale for doing so is given by Diewert and Lippe (2010). We generalise previous analyses by allowing for exit and entry of workers when measuring labour services using Norwegian microdata. We find that the bias from using hours worked compared to a labour index capturing various compositional effects can be substantial and systematic over time. In the case of Norway the bias explains about a quarter of the productivity slowdown after 2005.
    Keywords: Labour productivity; Index numbers; Unit value indices; Drobisch index
    JEL: C43 E24 J24 O47
    Date: 2015–09
  12. By: Tereza Miková (University of Economics, Prague)
    Abstract: The paper investigates the effect of IFRS on earnings management. I analyze whether earnings management reduced after IFRS adoption and use one of earlier studies verified method “loss avoidance thresholds”. This paper concentrates chosen European countries representatives.I examine sample of 771 companies (9272 firm-year observations) during the years 2000 – 2013. My results are different in selected countries. Study demonstrates that one set of accounting standards contributes to better reporting quality and reduce pervasiveness of earnings manipulation in France. But in contrast there is no difference supporting lower earnings management after than before IFRS application in Germany and the United Kingdom. Due to my findings, other political and economic factors, such a legal system or strength of capital market, play significant role in entire process to reach higher comparability and transparency cross-border companies’ financial statements. Overall, my result suggests that IFRS moderately contribute to accounting quality of reported financial statements and brings benefit for stakeholders but other economic factors are as well irreplaceable.
    Keywords: Accounting Standards, Earnings Manipulation, International Financial Reporting Standards, Loss Avoidance, Financial Reporting Quality.
    JEL: M41
  13. By: Giuntella, Osea (University of Oxford); Nicodemo, Catia (University of Oxford); Vargas-Silva, Carlos (University of Oxford)
    Abstract: This paper analyses the effects of immigration on waiting times in the National Health Service (NHS) in England. Linking administrative records from the Hospital Episode Statistics (2003-2012) with immigration data drawn from the UK Labour Force Survey, we find that immigration reduced waiting times for outpatient referrals and did not have significant effects on waiting times in Accident and Emergency (A&E) and elective care. These results are explained by the fact that immigration increases natives' internal mobility and that immigrants tend to be healthier than the natives moving to different areas. On the contrary, we show that outpatient waiting times tend to increase in areas where native internal migrants moved into. Finally, we find evidence that immigration increased waiting times for outpatient referrals in more deprived areas outside London. The increase in average waiting times in more deprived areas is concentrated in the years immediately following the 2004 EU enlargement and vanished in the medium-run (e.g., 3 to 4 years).
    Keywords: immigration, waiting times, NHS, access to health care, welfare
    JEL: I10 J61
    Date: 2015–09
  14. By: Francesca Carta (Bank of Italy); Lucia Rizzica (Bank of Italy)
    Abstract: We theoretically show that when mothers need to buy childcare services not only if they work but also if they want to search actively for a job, a reduction in the price of childcare will increase their likelihood of searching but may decrease their willingness to accept a job offer and therefore lower employment. We test these predictions empirically by means of a Regression Discontinuity design and find that the introduction in Italy of pre-kindergarten, a much cheaper alternative to day care for 2-year-old children, increased both participation in the labour market and employment of mothers of eligible children. This effect was driven largely by a significant decrease in the stated reservation wage.
    Keywords: childcare, female labour supply, public services
    JEL: J13 J16 H41
    Date: 2015–09
  15. By: Roberts, Jennifer (University of Sheffield); Taylor, Karl (University of Sheffield)
    Abstract: While the job search literature has increasingly recognised the importance of the spatial distribution of employment opportunities, local labour market conditions have been a notable omission from much of the empirical literature on commuting outcomes. This study of the commute times of dual earner couples in England and Wales finds that local labour market conditions are closely associated with commute times and their effects are not gender neutral. Male commute times are much more sensitive to local unemployment rates than women's; where women earn less than one-third of household income, their commute times do not seem to be sensitive to local unemployment. In addition, the more conducive the local labour market is to female employment, the less time women spend commuting. On average the 'female friendliness' of the local labour market has no effect on male commute times, but in households where women earn the majority of household income, men commute further if the local labour market is female friendly. We also show that it is important to account for the heterogeneity of household types; there are important differences in our results according to female income share, housing tenure, mover status and mode of travel.
    Keywords: commuting, local labour market, dual earner households
    JEL: D19 J24 R40
    Date: 2015–09
  16. By: Aleksandrs Aleksandrovs (Daugavipils University); Ilze Koroleva (Daugavpils University)
    Abstract: MYWeB project takes a balanced approach to assessing the feasibility of a European Longitudinal Study for Children and Young People (ELSCYP) through prioritising both scientific and policy imperatives. A Delphi study was carried out to help refine the list of options and criteria against which a development of a longitudinal survey was appraised. The focus of research was on finding a mutually beneficial meeting point between policy and research across Europe. Between October 2014 and February 2015, three questionnaires were issued to 334 panellist identified as experts in the fields of survey methodology, children and youth, well-being, and policy. Experts involved in the Delphi agreed that the role of evidence is important in social policy, particularly in order to have a better understanding of policy impact (65.6%), review the design of social policies (63.2%), monitor progress (60%) and measure the distribution of policy outcomes across different target groups (56.4%). There was a strong consensus amongst panel members that the evaluation of children and youth policies supports policy makers in improving policies (84.7%).
    Keywords: well-being, longitudinal survey, feasibility, delphi survey
    JEL: I30
  17. By: Pathak, Akhileshwar
    Abstract: E-retailing has exponentially grown in the past decade. Alongside, consumer grievances have also started surfacing. The Consumer Protection Bill, 2015 addresses this by giving the right to the consumer to cancel a consumer contract within 30 days. This is called ‘cooling-off’. The provision applies to a sale contract as well as a contract of service. The provision, in its current form, is skeletal, only declaring the right. The right needs to be detailed for it to be functional and effective. The European countries have had laws for more than a decade on ‘cooling-off’, putting into force the European Union directives on consumer rights. Exploring the European Union directives, the paper explores the basis and principles for ‘cooling-off’ and develops a draft chapter on ‘Distance Contract’ for inclusion in the bill. The directives also require the seller to give certain kinds of information and take the responsibility for the safe delivery of the goods to the consumer. The draft chapter develops provisions on these additional themes. The draft chapter ‘Distance Contracts’ is in Annexure to the paper.
  18. By: Eleni Karagiannaki; Lucinda Platt
    Abstract: While there has been substantial research on the impacts of the Great Recession on household incomes, there has been less attention paid to the effects on individual income. Using pooled data from the Family Resources Survey, we address the question of which groups gained and which lost in terms of their individual income between 2005-8 and 2009-12. We investigate changes in median individual incomes and across the distribution by age, ethnicity, social class and housing tenure. We also explore the role of different income sources in overall income changes. We find that working age men faced lower individual incomes across the distribution after the recession compared to the earlier period. By contrast, pensioners' incomes were protected. Working age women overall experienced individual income gains that largely came from higher labour income; but the pattern was more varied, with some groups of women losing out. The income gains that women in couples obtained were not sufficient to counterbalance the losses that men experienced.
    Keywords: individual incomes, Great Recession, income distribution, UK, working age, pensioners, gender, ethnicity, housing tenure
    JEL: D31
    Date: 2015–09
  19. By: David Cuberes (Clark University); Jennifer Roberts (Department of Economics, University of Sheffield)
    Abstract: Using information on the exact location of urban households in Britain for the period 2009-2013 we explore the validity of standard urban land use models by estimating the extent to which distance of residence from the city centre is a function of income. This is the first study of its kind for British cities. After controlling for household characteristics and access to transport, as well as city and time effects, and taking account of both spatial and serial correlation, we find a strong positive association between household’s income and distance from the city centre. We also estimate the income elasticity of demand for land and find that this is not large enough to support the view that richer households locate further from the city centre mainly because they prefer larger dwellings. Finally, we find that while poorer households live closer to the city centre, they have experienced increasing real incomes over the period relative to those who live further away. This supports the view that cities in Britain attract poor people rather than generate poverty.
    Keywords: urban poverty; cities; segregation by income
    JEL: I32 R23
    Date: 2015–10
  20. By: Anna Golejewska (Faculty of Economics, University of Gdansk)
    Abstract: The aim of the article is to analyze the use of the European Regional Development Fund for investment projects in Tri-City SMEs from Pomerania Regional Operational Programme and examine effects of these projects on a regional basis. 250 projects granted in the 2007-2013 programming period are analyzed. The analysis is based on the data provided by the Pomerania Development Agency Inc. Results of the analysis confirmed geographical and sectorial concentration of projects and significant diversity of total values of projects submitted by micro-, small- and medium-sized enterprises. Due to small share of the project beneficiaries in total number of firms in the Tri-City sub-region and fact that some projects are still ongoing, the assessment of the direct impact of the projects on the socio-economic situation of the sub-region is rather impossible. It can be noted that, at the micro-scale, the European Regional Development Fund improves competitiveness of enterprises and increases employment in the sub-region, particularly in the county of Gdañsk.
    Keywords: EU structural funds, investment, SMEs
    JEL: R11 M21
    Date: 2015–05
  21. By: Rehwald, Kai (Aarhus University); Rosholm, Michael (Aarhus University); Svarer, Michael (Aarhus University)
    Abstract: This paper compares the effectiveness of public and private providers of employment services. Reporting from a randomized field experiment conducted in Denmark we assess empirically the case for contracting out employment services for a well-defined group of highly educated job-seekers (unemployed holding a university degree). Our findings suggest, first, that private providers deliver more intense, employment-oriented, and earlier services. Second, public and private provision of employment services are equally effective regarding subsequent labour market outcomes. And third, the two competing service delivery systems appear to be equally costly from a public spending perspective.
    Keywords: active labour market policies, job-search assistance, contracting out, private provision of employment services, treatment effect evaluation, randomized trial, cost-analysis
    JEL: J64 J68 H41 H43 H44 L33
    Date: 2015–09

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