|
on Microeconomic European Issues |
|
Issue of 2016‒01‒18
twenty-two papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Simone Borghesi (University of Siena, Italy.); Chiara Franco (Catholic University of Sacred Heart, Milano, Italy.); Giovanni Marin (IRCrES-CNR, Milano, Italy.) |
| Abstract: | We consider the role played by the EU Emission Trading System (EU ETS) as a possible driver of outward Foreign Direct Investments (FDI henceforth). In particular, we aim at assessing whether EU ETS has any effect on outward FDI patterns of Italian firms. Using a novel panel dataset of about 59,000 firms covering the first two phases of the EU ETS and the pre-EU ETS period, we are able to observe the patterns of FDI by destination country of firms, distinguishing between those with plants covered by the EU ETS and other firms. Results show that, on average, firms in the EU ETS do not increase their presence in other countries. However, EU ETS firms operating in sectors particularly exposed to international competition increase their outward FDI towards countries not covered by the EU ETS. |
| Keywords: | EU ETS, FDI, carbon leakage |
| JEL: | F23 L23 Q50 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:srt:wpaper:0116&r=eur |
| By: | Xoaquín Fernández Leiceaga; Santiago Lago Peñas; Alberto Vaquero |
| Abstract: | Transport infrastructure investment is a cornerstone of growth-promoting strategies. However, in the case of Europe the relevant literature is increasingly failing to find a clear link between infrastructure investment and economic performance. This may be a consequence of overlooking the role of government institutions. This paper assesses the connection between regional quality of government and the returns of different types of road infrastructure in EU regions during the period between 1995 and 2009. The results unveil a strong influence of regional quality of government on the economic returns of transport infrastructure. In weak institutional contexts, investments in motorways – the preferred option by local governments – yield significantly lower returns than the more humble but possibly more efficient secondary road. Government institutions also affect the returns of transport maintenance investment. |
| Keywords: | Fiscal Federalism, decentralization, fiscal stability, intergovernmental relations, Spain. |
| JEL: | H70 H71 H72 H73 H74 H77 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:gov:wpaper:1601&r=eur |
| By: | Angela Cheptea; Charlotte Emlinger; Karine Latouche |
| Abstract: | This paper questions the impact of the globalization of the retail sector on the export activity of origin country agri-food firms. In a previous paper (Cheptea et al., 2015), we showed that the overseas expansion of a country’s retailers fostered its exports to foreign markets. This effect can be explained by a reduction in trade costs for retailers’ supplying firms in the origin country, or to a change in consumer preferences in the host country that benefits all origin country firms. In this paper, we evaluate which of the two mechanisms dominates. For that, we use an original firm-level database of French agri-food exports, identifying the domestic suppliers of French retailers through certification with the private IFS standard. We find that IFS certified French firms are more likely to export and export larger volumes than noncertified firms to markets where French retailers established outlets. We also show that when French retailers close down their activities in a market, IFS firms face a drop in exports to this market in the subsequent years. The results are robust to the use of different sets of firm- and country-specific fixed effects, are unaffected by possible selection and endogeneity biases, and by the presence in export markets of other retailers. The difference in behavior for certified and non-certified exporting firms on markets where French retailers operate confirms the trade cost advantage of retailers’ suppliers, which is lost when French retailers exit from the destination country. |
| Keywords: | multinational retailers, firm-level exports, private standards |
| JEL: | F12 F14 F23 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:rae:wpaper:201513&r=eur |
| By: | G.A. Meagher; R.A. Wilson; Hector Pollitt |
| Abstract: | In a recent study, the European Centre for the Development of Vocational Training (Cedefop) investigated the expected effect on European labour markets of the transition to a high-employment, low-carbon economy. The study extended its previous initiatives in skills forecasting to determine employment under different policy scenarios derived from the Europe 2020 Strategy. This strategy includes the so-called 20-20-20 climate and energy targets, namely, * a reduction in EU greenhouse gas emissions of at least 20% below 1990 levels; * a requirement that renewable sources represent 20% of EU final energy consumption; * a reduction in energy consumption of 20% from projected 2020 levels by improving energy efficiency. It also includes an employment target whereby 75% of the population aged 20-64 will be employed by 2020. In its quantitative analysis it employs the E3ME macro-econometric model to determine the effects of transition on the demand for labour by industry. The industry projections are then converted into demand for labour by skill (as represented by occupation and qualification) using employment shares taken from the earlier forecasts. The implementation of a demand-side policy package like the 2020 Strategy introduces structural pressures into the markets for labour in the sense that it creates tendencies towards excess demands for, or supplies of, skills. If the pressures are not accommodated by supply-side policies (such as training programs), they will tend to emerge as changes in relative wage rates and/or unemployment rates. One purpose of Cedefop's analysis is to reveal the nature of the structural pressures the Strategy releases, and hence kind of training programs that are required. However, its scope is limited because it abstracts from constraints imposed by the available supplies of labour. In this paper a CGE-style labour market extension MLME to the E3ME model is used to investigate how labour supply considerations affect the skill requirements of the Strategy. Specifically, it investigates the proclivity of the Strategy to produce mismatches between the demand for, and supply of, labour differentiated by occupation. Results are reported and compared for 26 EU countries. |
| Keywords: | Forecasting, CGE models, hybrid models, labour markets, structural imbalances |
| JEL: | C53 C58 D58 E27 J23 O41 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-259&r=eur |
| By: | Kelly, Robert (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland); O'Toole, Conor (Central Bank of Ireland) |
| Abstract: | We provide a micro-empirical link between the large literature on credit and house prices and the burgeoning literature on macroprudential policy. Using loan-level data on Irish mortgages originated between 2003 and 2010, we construct a measure of credit availability which varies at the borrower level as a function of income, wealth, age, interest rates and prevailing market conditions around Loan to Value ratios (LTV), Loan to Income ratios (LTI) and monthly Debt Service Ratios (DSR). We deploy a property-level house price model which shows that a ten per cent increase in credit available leads to an 1.5 per cent increase in the value of property purchased. Coeffcients from this model are then used to fit values under scenarios of macroprudential restrictions on LTV, LTI and DSR on credit availability and house prices in Ireland for 2003 and 2006. Our results suggest that macroprudential limits would have had substantial impacts on house prices, and that both the level at which they are set and the timing of their introduction is a crucial determinant of their impact on housing values. |
| Keywords: | Mortgages, credit availability, macroprudential policy, house prices. |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:06/rt/15&r=eur |
| By: | Jan Abrell (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland) |
| Abstract: | This paper develops a multi-country multi-sector general equilibrium model, integrating high-frequency electricity dispatch and trade decisions, to study the eects of electricity transmission infrastructure (TI) expansion and re- newable energy (RE) penetration in Europe for gains from trade and carbon dioxide emissions in the power sector. TI can benet or degrade environ- mental outcomes, depending on RE penetration: it complements emissions abatement by mitigating dispatch problems associated with volatile and spa- tially dispersed RE but also promotes higher average generation from low- cost coal if RE production is too low. Against the backdrop of European decarbonization and planned TI expansion, we nd that emissions increase for current and targeted year-2020 levels of RE production and decrease for year-2030 targets. Enhanced TI yields sizeable gains from trade that de- pend positively on RE penetration, without creating large adverse impacts on regional equity. |
| JEL: | F18 Q28 Q43 Q48 C68 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:16-229&r=eur |
| By: | Balazs Lengyel (Institute of Economics - Centre for Economic and Regional Studies - Hungarian Academy of Sciences); Rikard Eriksson (Department of Geography and Economic History, Umea University) |
| Abstract: | This paper provides a new empirical perspective for analysing the role of social networks for an economic geography approach on regional economic growth by constructing large-scale networks from employee-employee co-occurrences in plants in the entire Swedish economy 1990-2008. We calculate the probability of employee-employee ties at plant level based on homophily-biased random network assumptions and trace the most probable relations of every employee over the full period. Then, we look at the inter-plant ties for the 1995-2008 period because the network is already well developed after five years of edge construction. We argue that these personal acquaintances are important for local learning opportunities and consequently for regional growth. Indeed, the estimated panel Vector Autoregressive models provide the first systematic evidence for a central claim in economic geography: social network density has positive effect on regional productivity growth. The results are robust against removing the old and therefore weak ties from the network. Interestingly, the positive effect of density on growth was found in a segment of the co-worker network as well, in which plants have never been linked by labour mobility previously. |
| Keywords: | social network, homophily, probability of ties, labour mobility, regional productivity growth, panel vector autoregression |
| JEL: | D85 J24 J61 R11 R23 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1550&r=eur |
| By: | Karoly Attila Soos (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences) |
| Abstract: | Statistical data display a high level of sectorial and geographical concentration in the exports of three Central European new member states of the European Union: the Czech Republic, Hungary and Slovakia. All the three export huge quantities of the products of certain sectors of engineering industries, and the main destination of their exports are the partner countries in the European Union. In this article, we discuss these issues in a comparative perspective, including into the analysis some other Central–Eastern European (CEE) new EU member states and also some other (non-CEE) EU member states. With more thorough examination we find that both kinds of concentration (which are also interrelated) are at lower levels than it appears in foreign trade statistics, and still rather high in international comparison. Concentration has both positive and negative (dangerous) sides. |
| Keywords: | External trade, international value chains, clustering, industrial structure, European Union, Central–Eastern Europe, Hungary, Czech Republic, Slovakia, mechanical engineering, automotive industry |
| JEL: | F13 F15 F23 F43 H25 J24 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1548&r=eur |
| By: | Neuhoff, Karsten |
| Abstract: | We first discuss different rules for pricing and provision of balancing across EU member states and their implications. Some member states face significant transmission constraints inside their pricing zone(s). In principle, this can be avoided with smaller pricing zones and in some instances transmission expansion. We discuss in the second part, how in practice different strategies are pursued to accommodate internal transmission constraints within balancing mechanisms. European market integration has to date focused on enhancing day-ahead trading. We discuss in a third part the experience, benefits and perspectives for better integrating balancing mechanisms across EU member states before we conclude. |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:125565&r=eur |
| By: | Giovanis, Eleftherios |
| Abstract: | This study explores the relationship between job satisfaction, employee loyalty and various types of flexible employment arrangements using the Workplace Employee Relations Survey (WERS) in 2004 and 2011. A propensity score matching and fixed effects regressions are applied. Finally, Bayesian Networks (BN) and Directed Acyclic Graphs (DAGs) are employed in order to confirm the causality between employment types explored and the outcomes of interest. Furthermore, an instrumental variables (IV) approach based on BN framework is proposed and applied in this study. The results support that there is a positive causal effect from these employment arrangements on job satisfaction and employee loyalty. |
| Keywords: | Bayesian Networks; Directed Acyclic Graphs; Employee Loyalty; Employment Arrangements; Job Satisfaction; Teleworking; Workplace Employment Relations Survey |
| JEL: | C11 J28 J53 J6 J63 J81 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68669&r=eur |
| By: | A. Arrighetti; F. Landini; L. Caricati; N. Monacelli |
| Abstract: | The aim of the work is to investigate the impact of a prolonged economic recession on the entrepreneurial intentions of young people (university students) distinguishing between propensity to start a new business (i.e. degree of interest in entrepreneurship) and perceived likelihood of becoming an entrepreneur (i.e. probability to succeed). Furthermore we verify if the recession strengthens the orientation to exploit new market opportunities, or simply supports self-employment objectives.Design/methodology/approach–Entrepreneurial intent and feasibility and psycho-social and economic variables concerning a sample of 3684 Italian university students enrolled in 12 different faculties. Information was gathered through questionnaires distributed in both electronic and paper-and-pencil form. Findings–Firstly, we found that while the perceived strength of the economic crisis does not impact on the propensity towards entrepreneurship, it has a negative and highly significant impact on the likelihood to start a business. Secondly, when we distinguished between opportunity-based and necessity-based types, we found that while for the latter the crisis impacts only on the perceived likelihood to become an entrepreneur, for the former it affects both dimensions of entrepreneurship, i.e., both propensity and perceived likelihood. Moreover, neither family support nor economic institutions are perceived as relevant in sustaining entrepreneurial intentions. On the contrary, the university is considered as a key support entity. Originality/value–The present paper is one of the few studies concerning the influence of rapid worsening of external economic context (severe recession) on the entrepreneurial intent. Research limitations–Reliance on cross-sectional questionnaires instead of an experimental design imposes caution about the causal relationships between predictors and entrepreneurial intent |
| Keywords: | entrepreneurial intention; university students; Italy; economic crisis; opportunity; necessity |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2015-ep05&r=eur |
| By: | Patterson, Christina (Massachusetts Institute of Technology); Sahin, Aysegul (Federal Reserve Bank of New York); Topa, Giorgio (Federal Reserve Bank of New York); Violante, Giovanni L. (New York University) |
| Abstract: | The UK experienced an unusually prolonged stagnation in labor productivity in the aftermath of the Great Recession. This paper analyzes the role of sectoral labor misallocation in accounting for this “productivity puzzle.” If jobseekers disproportionately search for jobs in sectors where productivity is relatively low, hires are concentrated in the wrong sectors and the post-recession recovery in aggregate productivity can be slow. Our calculations suggest that, quantified at the level of three-digit occupations, this mechanism can explain up to two-thirds of the deviations from trend-growth in UK labor productivity since 2007. |
| Keywords: | misallocation; productivity |
| JEL: | E24 E32 J24 |
| Date: | 2016–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:757&r=eur |
| By: | Kelly, Robert (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland) |
| Abstract: | The 2007-2008 financial crisis yielded a significant number of delinquent mortgage loans, which ordinarily would have faced foreclosure and repossession. However, given the negative externalities of repossession, policy response has shifted towards forbearance and mortgage modification, which has led to longer spells in default for delinquent mortgage holders. It is therefore imperative to move beyond binary models of default towards an understanding of the factors that drive the depth of default spells. Exploiting a highly detailed dataset on financially distressed households in Ireland in 2012 and 2013, we are able to identify the impact of a range of current household-level information, generally not available in loan-level studies of mortgage default, on the probability of entering early and deep states of mortgage default. Our results suggest that high loan-to-value ratios, consumer credit growth, shocks to mortgage affordability and unemployment should all trigger serious concerns among policy makers regarding subsequent stability in the mortgage market, with these measures all shown to have differentially large impacts on entry to deep, relative to early-stage arrears. |
| Keywords: | Mortgages, default, days past due, affordability. |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:05/rt/15&r=eur |
| By: | Tamas Hajdu (Institute of Economics - Centre for Economic and Regional Studies - Hungarian Academy of Sciences); Gabor Hajdu (Institute for Sociology - Centre for Social Sciences - Hungarian Academy of Sciences) |
| Abstract: | In the last decade, a number of experiments have stated that spending money on experiences rather than on material goods tends to make people happier. However, the experimental designs used to analyze the relationship between consumption and subjective well-being had several limitations: small and homogeneous samples, a direct question assessing the effect of consumption, and a potential social desirability bias due to the stigmatization of materialism. To reduce these limitations, we used a survey method. In two studies based on survey data from nationally representative samples in Hungary, we estimated linear and non-linear associations of experiential and material expenditures with life satisfaction. Although both experiential and material expenditures were positively associated with life satisfaction, evidence supporting the greater return received when buying experiences was limited. The main difference between experiential purchases and material purchases was that the marginal utility of expeiential purchases appeared to be linear, whereas the marginal utility of material purchases was decreasing. Despite the limited differences between the effects of experiential and material purchases, the results of the non-linear estimates indicate that to maximize life satisfaction, an average person should allocate more money to buying experiences rather than material goods. |
| Keywords: | subjective well-being, life satisfaction, consumption, experiential purchase, material purchase |
| JEL: | I31 D12 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1555&r=eur |
| By: | Taryn Ann Galloway; Rannveig Kaldager Hart (Statistics Norway) |
| Abstract: | The relationship between income, cost of childrearing and fertility is of considerable political and theoretical interest. We utilize exogenous variation in family income and the direct cost of children to estimate causal effects on fertility. The variation comes from a regional child benefit and tax reform implemented in the northern municipalities of the Norwegian county Troms. The southern municipalities of the same county constitute a plausible and empirically similar control group. Individual-level multivariate analysis suggests that a reduced direct cost of children increases fertility, mainly among unmarried women in their early 20s. We find little evidence of income effects on fertility. Our results are robust to a variety of specifications, including a standard difference-indifference setup, and regional trend modeling. The findings indicate that lowering the direct cost of a child would shift childbearing to lower ages in Norway. However, a lower price of children is also likely to induce a shift towards non-union childbearing or childbearing in less stable unions. |
| Keywords: | Fertility; Quasi experiment; Income effect; Public policy; Difference-in-difference |
| JEL: | J13 J12 J18 H23 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:828&r=eur |
| By: | Nicolai 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 data. I propose a comprehensive operationalization of a multidimensional poverty index for an advanced economy like Germany, including a justification for several dimensions. Income, however, is rejected as a dimension on both conceptual and empirical grounds. I document that insights obtained by the proposed multidimensional poverty index are consistent with earlier findings. Moreover, I exploit the decomposability of the Alkire-Foster measure for both a consistently detection of specific patterns in multidimensional poverty and the identification of driving factors behind its changes. Finally, the results suggest that using genuine multidimensional measures makes a difference. Neither a single indicator nor a dashboard seem capable of replacing a multidimensional poverty index. Moreover, I find multidimensional and income-poverty measures to disagree on who is poor. |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:qeh:ophiwp:ophiwp098.pdf&r=eur |
| By: | Tomas Havranek; Zuzana Irsova; Jitka Lesanovska |
| Abstract: | An important component of monetary policy transmission is the pass-through from financial market interest rates, directly influenced or targeted by central banks, to the rates that banks charge firms and households. Yet the available evidence on the strength and speed of the pass-through is mixed and varies across countries, time periods, and even individual banks. We examine the pass-through mechanism using a unique data set of Czech loan and deposit products and focus on bank-level determinants of pricing policies, especially cost efficiency, which we estimate employing both stochastic frontier and data envelopment analysis. Our main results are threefold: First, the long-term pass-through was close to complete for most products before the financial crisis, but has weakened considerably afterward. Second, banks that provide high rates for deposits usually charge high loan markups. Third, cost-efficient banks tend to delay responses to changes in the market rate, smoothing loan rates for their clients. |
| Keywords: | Bank pricing policies, cost efficiency, data envelopment analysis, monetary transmission, stochastic frontier analysis |
| JEL: | E43 E58 G21 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2015/09&r=eur |
| By: | Anaïs Henneguelle (Ecole Normale Supérieure, Cachan ; CNRS (UMR 8533), IDHES); Benjamin Monnery (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Annie Kensey (Ministère de la Justice - DAP (PMJ5); CNRS, CESDIP) |
| Abstract: | Many countries have recently adopted electronic monitoring (EM) as an alternative sentence in order to reduce incarceration while maintaining public safety. However, the empirical evidence on the effects of EM on recidivism (relative to prison) is very scarce worldwide. In this paper, we adress this debated question using quasi-experimental data from France. Our empirical strategy exploits the incremental roll-in of electronic monitoring in France, which started as a local experiment in four courts in 2000-2001, and was later adopted by more and more courts (2002-2003). Our IV estimates show that fully converting prison sentences into electronic monitoring has long-lasting beneficial effects on recidivism, with estimated reductions in probability of reconviction of 6-7 percentage points (9-11%) after five years. There is also evidence that, in case of recidivism, EM leads to less serious offenses compared to prison. These beneficial effects are particularly strong on electronically monitored offenders who received control visits at home from correctional officers, were obliged to work while under EM, and had already experienced prison before. This pattern suggests that both rehabilitation and deterrence are important factors in reducing long-term recidivism, and that electronic monitoring can be a very cost-effective alternative to short prison sentences. However, the massive development of EM in France in recent years, with shorter and less intensive supervision, may reduce its effectiveness. |
| Keywords: | economics of crime, prison, electronic monitoring, recidivism |
| JEL: | K42 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1603&r=eur |
| By: | Antonio Fici |
| Abstract: | Social enterprise lawmaking is a growth industry. In the United States alone, over the last few years, there has been a proliferation of state laws establishing specific legal forms for social enterprises. The situation is not different in Europe, where the process began much earlier than in the United States and today at least fifteen European Union member states have specific laws for social enterprise. This article will describe the current state of the legislation on social enterprise in Europe, inquiring into its fundamental role in the development of the social economy and its particular logics as distinct from those of the for-profit capitalistic economy. It will explore the models of social enterprise regulation that seem more consistent with the economic growth inspired by the paradigms of the social economy. It will finally explain why, in regulating and shaping social enterprise, the model of the social enterprise in the cooperative form is to be preferred to that of the social enterprise in the company form. |
| Keywords: | Social enterprise; Social economy; Cooperatives; Comparative law; Non-profit corporate governance |
| JEL: | K22 L31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpeu:1582&r=eur |
| By: | Andrey Ivanov, Sheena Keller, and Ursula Till-Tentschert |
| Abstract: | Reliable data and robust conceptual framework are two necessary preconditions for anti-poverty measures need to be effective and achieve their goals Ð bringing people out of poverty. Both preconditions are far from met in the case of Roma Ð one of the biggest minorities in Europe. Data on the absolute number and distribution of Roma population in the EU is patchy, incomparable Ð or does not exist at all. Thus addressing the data challenge is a necessary precondition for populating indicators that reflect the true face of Roma poverty Ð are ultimately, for the efforts to take Roma out of poverty to succeed. In its first part, the paper provides an overview of the available approaches and the possible sources of information that can generate the data necessary for monitoring different aspects of Roma inclusion process. The authors point out that different sources have their strengths and weaknesses and using them in complementary manner is desirable. How to use the data (what indicators to apply) is equally important. In its second part the paper proposes a multidimensional poverty index that is better reflecting the specifics of Roma poverty and exclusion than traditional poverty or vulnerability indicators. However two critically important dimensions remains insufficiently covered Ð namely ÔagencyÕ and ÔaspirationsÕ. The authors call for reflecting these dimensions through the thematic components in the standardized European social surveys. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:qeh:ophiwp:ophiwp096.pdf&r=eur |
| By: | Kadri Männasoo; Jaanika Meriküll |
| Abstract: | This paper studies financing constraints on R&D over the most recent boom and bust episode in Central and Eastern Europe (CEE). Given that financial and venture capital markets in CEE are thin in comparison to those in high-income economies and that many of CEE countries experienced a credit crunch during the last recession, it is proposed that financing constraints have a significant adverse effect on R&D activity in these countries. The paper uses two complementary firm-level data-sources from ten CEE countries. We find that financing constraints have a substantial effect on R&D expenditures, as the probability of credit constrained firms undertaking R&D activities is around 70% lower than for other firms and firms’ R&D expenditure sensitivity to cash flow is very high. Despite the severity of the crisis, the adverse effect of financing constraints for R&D did not increase during the financial crisis. We also find that, conditional on credit constraints, firms’ R&D activity is higher during a recession |
| Keywords: | R&D financing constraints, credit constraints, business cycle, Central and Eastern Europe |
| JEL: | O16 O32 O52 E32 P23 |
| Date: | 2015–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2015-3&r=eur |
| By: | Mateusz Pipień; Sylwia Roszkowska |
| Abstract: | We estimate the Mincer equations for a set of European countries. The variability of parameters, describing the impact of years of schooling and the experience to the wages, was obtained by application of the system of Seemingly Unrelated Regression Equations (SURE). The differences between parameters were tested given two alternative stochastic assumptions. In the first model, no contemporaneous correlations between error terms in the system is imposed. This may be related to the standard country regression approach. In the second approach the unrestricted covariance matrix is considered, making error terms stochastically dependent. The contemporaneous correlations of error terms in the SURE system were empirically supported. Also, rich parameterisation of covariance matrix of contemporaneous relations reduced statistical uncertainty about differences in parameters describing return on education effect. Consequently, the country heterogeneity of return on education, which seems intuitively correct, was obtained in the system of regressions with complex stochastic structure. |
| Keywords: | Mincer equation, returns to skills, SURE, Zellner estimator |
| JEL: | J31 C31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:226&r=eur |