nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2016‒02‒04
seventeen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The Effect of Unemployment Benefit Generosity on Unemployment Duration: Quasi-experimental Evidence from Slovenia By Primož Dolenc; Suzana Laporšek; Matija Vodopivec; Milan Vodopivec
  2. In-house versus External Basic Research and First-to-market Innovations By Dolores Añón Higón
  3. Cost Structure and Efficiency in Community Hospitals in the NHS in England By John Buckell; Andrew Smith; Claire Hulme; John Young
  4. TFP Convergence in German States since Reunification: Evidence and Explanations By Michael C. Burda; Battista Severgnini; ;
  5. Bioeconomy in Poland: Condition and potential for development of the biomass market By Gołębiewski, Jarosław
  6. Working Paper 09-15 - Fuel excise reform in Belgium - Long term effects on the environment, traffic and public finance By Alex Van Steenbergen
  7. Social Identity, Attitudes Towards Cooperation, and Social Preferences: Evidence From Switzerland By Devesh Rustagi; Marcella Veronesi
  8. Financial connectedness among European volatility risk premia By Andrea Cipollini; Iolanda Lo Cascio; Silvia Muzzioli
  9. Eliciting the level of health inequality aversion in England By Matthew Robson; Miqdad Asaria; Richard Cookson; Aki Tsuchiya; Shehzad Ali
  10. Assessment of strategies for ICT investments using European Structural and Investment Funds: reflections from experts and practical examples By Katerina CIAMPI STANCOVA; Jens SORVIK
  11. Do Smart Grids Boost Investment in Photovoltaics? The Prosumer Investment Decision By Chiara D'Alpaos; Marina Bertolini; Michele Moretto
  12. A unisex stochastic mortality model to comply with EU Gender Directive By An Chen; Elena Vigna
  13. Labor Supply Effects of Winning a Lottery By Matteo PICCHIO; Sigrid SUETENS; Jan C. VAN OURS
  14. The effects of financialization on investment: Evidence from firm-level data for the UK By Daniele Tori; Özlem Onaran
  15. Gender, ethnicity and household labour in married and cohabiting couples in the UK By Kan,  Man Yee; Laurie, Heather
  16. Information and Crime Perceptions: Evidence from a Natural Experiment By Nicola Mastrorocco; Luigi Minale
  17. Rethinking the security of the European Union’s gas supply By Simone Tagliapietra; Georg Zachmann

  1. By: Primož Dolenc; Suzana Laporšek; Matija Vodopivec; Milan Vodopivec
    Abstract: The paper analyses the effects of a 2011 increase in the unemployment benefit replacement rate on the job-finding rate of Slovenian benefit recipients. Using registry data on the universe of Slovenian unemployment benefit recipients, we exploit legislative changes that selectively increased the replacement rates for certain groups of workers while leaving them unchanged for others. Applying this quasi-experimental approach, we find that increasing the replacement rate significantly decreases the hazard rate of the transition from unemployment to employment, with an implied elasticity of the hazard rate with respect to benefit replacement rate being 0.7 to 0.9. The results also show that increase of the unemployment benefit replacement rate does not affect the job-finding probability of jobseekers whose reason for unemployment is employer exit, and that the effects of the increase of replacement rate are present only upon exit to employment and not to inactivity.
    JEL: J64 J65
    Date: 2016–01–20
  2. By: Dolores Añón Higón (Departamento de Economía Aplicada II, Universitat de València)
    Abstract: This paper explores to what extent conducting internal basic research, as opposed to external basic research (i.e. outsourcing and collaboration with universities) encourages firms to bring new products into the market ahead of competitors, and contributes to innovation performance. The analysis is based on a sample of Spanish manufacturing firms over the period 2006-2012. Our findings suggest that conducting in-house basic research affects firm’s propensity to introduce product novelties. Furthermore, performing this activity continuously affects the probability of being product-pioneer in low and medium-low tech sectors. Collaboration with universities also helps in introducing new products ahead of competitors, but contracting scientific research from universities does not lead to a pioneer strategy
    Keywords: basic research, in-house, outsourcing, collaboration, pioneer, imitation
    JEL: D22 L21 O32
    Date: 2016–01
  3. By: John Buckell (School of Public Health, Yale University); Andrew Smith (Institute for Transport Studies, University of Leeds); Claire Hulme (Leeds Institute for Health Sciences, University of Leeds); John Young (Leeds Institute for Health Sciences, University of Leeds)
    Abstract: Community hospitals provide intermediate care, which is rising up the political agenda as issues of population ageing and the integration of health and social care gain prominence. Currently, services in community hospitals are modestly provided, but funding could be channelled to aid their expansion, if supported by evidence. The clinical benefits of community care relative to hospital-based treatment are well documented for elderly patients. However, economic evidence of intermediate care is scant. In this study, we look to provide some insights the costs of service provision in intermediate care. Specifically, we consider the provision of intermediate care in community hospitals, and apply econometric techniques for the first time. We make use of a unique data set to explore the cost structure of intermediate care in the community hospital setting and assess the relative efficiency thereof. We further consider the drivers of costs and economies of scale. We find efficiency of around 83% and evidence of economies of scale in community hospitals.
    Keywords: Efficiency; Community Hospitals; Intermediate Care; Benchmarking
    JEL: I11 I18 K23 L32
    Date: 2016
  4. By: Michael C. Burda; Battista Severgnini; ;
    Abstract: A quarter-century after reunication, labor productivity in eastern Germany continues to lag systematically behind the West. Denison-Hall-Jones point-in-time estimates point to large gaps in total factor productivity as the proximate cause, and auxiliary measurements which do not rely on capital stock data conrm a slowdown in TFP growth after 2000. Strikingly, capital intensity in eastern Germany, especially in industry, has overshot values in the West, casting doubt on the embodied technology hypothesis. Indeed, TFP growth is negatively associated with rates of expenditures on both total investment and plant and equipment. The best candidates for explaining the stubborn East-West TFP gap are the low concentration of managers in the East and the insucient R&D expenditure, rather than the concentration of rm headquarters and R&D personnel.
    Keywords: Productivity, regional convergence, German reunication
    JEL: D24 E01 E22 O33 O47
  5. By: Gołębiewski, Jarosław
    Abstract: The aim of the study is to determine the condition of bioeconomy in Poland. Particular attention was paid to the discussion of the objectives and priorities of the national and EU bioeconomy policies and to economic instruments to support the implementation of these policies. The study also covers the analysis of condition of the biomass production sector in Poland, taking into account regional differences. The study was based on the source literature on the subject, programming documents of the European Union and guiding principles for the national bioeconomy development policy in Poland. Statistical data by Eurostat and FAOSTAT were used for the evaluation of the potential of the bioeconomy. The research has confirmed that Poland has many traditional industries, which not only produce the biomass, but also process raw materials of biological origin. Bioeconomy is one of the largest and the most important segments of the Polish economy and an important component of the EU market.
    Keywords: bioeconomy, biomass, bioenergy, biomaterials, economic policy, Agricultural and Food Policy,
    Date: 2015
  6. By: Alex Van Steenbergen
    Abstract: This paper seeks to analyze the long term effects on traffic, environmental quality and public finance of the planned reform of fuel excise duties in Belgium. In the framework of a large scale tax reform, the Belgian federal government will implement an equalization of diesel and petrol excise rates over the 2016-2018 period.
    JEL: H21 H23 Q53 Q55 Q58
    Date: 2015–12–08
  7. By: Devesh Rustagi (Goethe University Frankfurt); Marcella Veronesi (Department of Economics (University of Verona))
    Abstract: We investigate the role of social identity in explaining individual variation in social preferences in the domain of cooperation. We combine measures of social identity at both extensive and intensive margins with measures of social preferences elicited using a public goods game in the strategy method among a representative sample of Swiss households. We document a strong association between social identity and social preferences, which becomes stronger with the degree of social identity. Using different data sources, we show that social identity matters also for attitudes towards cooperation. Our results are not driven by differences in national or even local institutions, geography, historical, and economic conditions. Additional analyses show that grandparental and parental background shapes social identity, as well as social preferences. Our design allows us to go beyond behavior and disentangle social preferences from beliefs, highlighting the importance of social identity for deeper social preferences in a natural field setting.
    Keywords: Social identity, social preferences, conditional cooperation, attitudes towards cooperation, public goods game
    JEL: C93 D03 D70 H41 Z13
    Date: 2016–01
  8. By: Andrea Cipollini; Iolanda Lo Cascio; Silvia Muzzioli
    Abstract: In this paper we use the Diebold Yilmaz (2009 and 2012) methodology to estimate the contribution and the vulnerability to systemic risk of volatility risk premia for five European stock markets: France, Germany, UK, Switzerland and the Netherlands. The volatility risk premium, which is a proxy of risk aversion, is measured by the difference between the implied volatility and expected realized volatility of the stock market for next month. While Diebold and Yilmaz focus is on the forecast error variance decomposition of stock returns or range based volatilities employing a stationary VAR in levels, we account for the (locally) long memory stationary properties of the levels of volatility risk premia series. Therefore, we estimate and invert a Fractionally Integrated VAR model to compute the cross forecast error variance shares necessary to obtain the index of total and directional connectedness.
    Keywords: volatility risk premium, long memory, FIVAR, financial connectedness
    JEL: C32 C38 C58 G13
    Date: 2015–12
  9. By: Matthew Robson (Department of Economics and Related Studies, University of York, UK.); Miqdad Asaria (Centre for Health Economics, University of York, UK.); Richard Cookson (Centre for Health Economics, University of York, UK.); Aki Tsuchiya (Department of Economics and School of Health and Related Research, University of Sheffield, UK.); Shehzad Ali (Centre for Health Economics and Department of Health Sciences, University of York, UK.)
    Abstract: Policy makers faced with equality-efficiency trade-offs can articulate the nature and extent of their health inequality aversion using social welfare functions. In this study we use data from an online survey of the general public in England (n=246) to elicit health inequality aversion parameters by numerically solving Atkinson and Kolm social welfare functions. We elicit median inequality aversion parameters of 10.95 for Atkinson and 0.15 for Kolm. These values suggest substantial concern for health inequality among the English general public which, at current levels of quality adjusted life expectancy, implies weighting health gains to the poorest fifth of people in society six to seven times as highly as health gains to the richest fifth.
    Keywords: health inequality, inequality aversion, social preferences, survey, welfare function
    Date: 2016–01
  10. By: Katerina CIAMPI STANCOVA (European Commission – JRC - IPTS); Jens SORVIK (European Commission – JRC - IPTS)
    Abstract: DG Connect and DG JRC have been supporting MSs and regions in fostering the ICT dimension of planned investments under ESIF. As part of this activity, assistance has been given to seven EU regions. This paper provides a systematic summary of the experts’ findings and discusses critical issues pointed out in the expert reports and at an expert workshop.
    Keywords: regional policies, regional innovation, smart specialisation, European Structural and Investment Funds, information and communication technologies (ICT), Digital Agenda
    Date: 2016–01
  11. By: Chiara D'Alpaos (University of Padova); Marina Bertolini (University of Padova); Michele Moretto (University of Padova)
    Abstract: In Italy and in many EU countries, the last decade was characterized by a large development of distributed generation power plants. Their presence determined new critical issues for the design and management of the overall energy system and the electric grid due to the presence of discontinuous production sources. It is commonly agreed that contingent problems that affect local grids (e.g. inefficiency, congestion rents, power outages, etc.) may be solved by the implementation of a ?smarter? electric grid. The main feature of smarts grid is the great increase in production and consumption ?flexibility. Smart grids give producers and consumers, the opportunity to be active in the market and strategically decide their optimal production/consumption scheme. The paper provides a theoretical framework to model the prosumer?s decision to invest in a photovoltaic power plant, assuming it is integrated in a smart grid. To capture the value of managerial fl?exibility, a real option approach is implemented. We calibrate and test the model by using data from the Italian energy market.
    Date: 2016–01
  12. By: An Chen; Elena Vigna
    Abstract: EU Gender Directive ruled out discrimination against gender in charging premium for insurance products. This prohibition prevents the use of the standard actuarial fairness principle to price life insurance products, with an evident negative effect on pricing efficiency. According to current actuarial practice, unisex premiums are calculated with a simple weighting rule of the gender-specific life tables. Up to our knowledge, there seems to be neither unisex fairness principle in the actuarial literature, nor unisex mortality model. This paper is the first attempt to fill this gap. First, we introduce a unisex fairness principle and the corresponding unisex fair premium. Then, we provide a unisex stochastic mortality model for the mortality intensity that is underlying the pricing of a life portfolio of females and males belonging to the same cohort. Finally, we calibrate the unisex mortality model using the unisex fairness principle. We find that the weighting coefficient between the males' and fem ales' own mortalities depends mainly on the quote of portfolio relative to each gender, on the age, and on the type of insurance product. We also investigate the impact of the correlation among the two mortality intensities on the weighting coefficient. The knowledge and the adoption of a proper unisex mortality model should help life insurance companies in many tasks, including pricing, reserving, profit testing, calculation of solvency capital requirements and, ultimately, should result in improved competitiveness.
    Keywords: Actuarial fairness, unisex tariff, stochastic mortality intensity, Gender Directive, life table, doubly stochastic process.
    JEL: C1 C13 C18 C38 J11
    Date: 2015
  13. By: Matteo PICCHIO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Sigrid SUETENS (Department of Economics, CentER, TilburgUniversity, The Nederlands); Jan C. VAN OURS (Department of Economics, Tilburg University, The Netherlands)
    Keywords: Labor supply, income effects, lottery players, wealth shocks
    JEL: J22 J29
    Date: 2016–01
  14. By: Daniele Tori (University of Greenwich); Özlem Onaran
    Abstract: This paper estimates the effects of financialization on physical investment in the UK using panel data based on balance-sheets of publicly listed non-financial companies supplied by Worldscope for the period 1985-2013. We find robust evidence of an adverse effect of not only financial payments (interests and dividends) but also financial incomes on the rate of accumulation. The negative impacts of financial incomes from interests and dividends are particularly strong for the pre-crisis period. Our findings support the ‘financialization thesis’ that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term concerns for productivity.
    Keywords: Financialization, Investment, Non-financial sector, Firm data, United Kingdom
    JEL: C23 D22 G30
    Date: 2016–01
  15. By: Kan,  Man Yee; Laurie, Heather
    Abstract: There is an extensive literature on the domestic division of labour within married and cohabiting couples and its relationship to gender equality within and outside the household. UK quantitative research on the domestic division of labour across ethnic groups has been limited by a lack of data that enables disaggregation by ethnic group. This paper uses data from Understanding Society, the UK Household Longitudinal Study containing sufficient sample sizes of ethnic minority groups for meaningful comparisons. We find significant variations in patterns of domestic labour by ethnic group, gender, education and employment status after accounting for individual and household characteristics. 
    Date: 2016–01–13
  16. By: Nicola Mastrorocco (London School of Economics); Luigi Minale (Universidad Carlos III de Madrid)
    Abstract: This paper investigates the influence of media on the beliefs and perceptions individuals hold, with a focus on crime perceptions. We study the case of Italy, where the majority of television channels have been under the influence of the former Prime Minister Silvio Berlusconi for more than a decade. First, we document that these channels systematically over represent crime news compared to others. We then test if individuals revise their perceptions about crime when exposure to news programs broadcast by a specific group of partisan channels is reduced. In order to identify the causal effect we exploit a natural experiment in the Italian television market where the staggered introduction of the digital TV signal led to a drastic drop in the viewing shares of the channels above. Combining unique data on each channel’s crime news coverage and prime-time viewing shares, we find that reduced exposure to crime related news decreased concerns about crime, an effect that is mainly driven by older individuals who, on average, watch more television and use alternative sources of information (such as Internet, radio and newspapers) less frequently. Finally, we show that this change in crime perceptions is likely to have important implications for voting behaviour.
    Keywords: information, mass media, persuasion, crime perceptions
    JEL: D72 D83 K42 L82
    Date: 2016–01
  17. By: Simone Tagliapietra; Georg Zachmann
    Abstract: Highlights The security of the European Union’s gas supplies is crucial to ensuring that supplies to households are not disrupted in freezing winters, that industry can flourish and that the EU cannot be blackmailed in vital foreign policy questions. Gas supply security should be addressed at EU level because a joint solution would be cheaper, national approaches could undermine the internal energy market and have adverse effects on other countries, and the EU Treaty explicitly calls for energy solidarity. The current focus on supply diversification and reduction of dependence on imported gas is expensive and does not constitute a systemic response. Instead of doing everything to reduce gas supplies from key suppliers, gas supply security could more effectively be safeguarded by ensuring that unused alternatives are maintained so that they can be tapped into for an indefinite period in case of supply disruption from a key supplier. This Policy Contribution outlines a market approach that could safeguard gas supply security at very low cost. The European Union would benefit from a new approach to ensure the security of its gas supply, not least because gas imports are likely to increase. The EU’s existing gas infrastructure is sufficient to buffer a major supply shock. Therefore, instead of focusing on expensive policies to stimulate supply diversification and to reduce of dependence on imports, the aim should be to find a way to maintain an adequate level of flexibility and make it available when needed. This could be done by creating an EU market for a gas security margin, which could be an asset for the EU in the context of the unpredictable nature of gas supplies, with countries today perceived as secure being potentially affected by supply interruptions in the future, and the need to overcome the current EU patchwork of fragmented national and technology-specific supply-security measures. The market for a gas security margin would be designed to have the lowest possible cost by relying on the cheapest flexibility options available, and by shielding the internal gas market from ad-hoc intervention. The distributive effects and the political feasibility of such approach would have to be taken into account. The EU gas market - current trends and future scenarios In the midst of the 2014 Ukraine crisis, concerns about a potential politically motivated disruption of all EU gas supplies from Russia, and especially those that pass through Ukraine, triggered a discussion on creating an Energy Union to counter this threat (Zachmann, 2014). These discussions lifted energy issues to the top of the agenda of the European Commission under its president Jean-Claude Juncker (European Commission, 2014). The high priority given to gas supplies arose because - (1) gas represents about one quarter of the EU energy mix; (2) about one third of this gas is imported from Russia; and (3) in contrast to oil or coal, it is not possible to bring large amounts of gas to where it is needed if the corresponding infrastructure is not in place (Figure 1). Figure 1 - The EU gas market - current trends Source - Bruegel on the basis of BP (2015). Note - Demand/supply difference is a result of re-exports of LNG, stock changes (eg medium-term storage, regasification terminals) and transportation losses. This implies the EU is vulnerable to a few external suppliers that might, at any moment, cut their supplies for technical or geopolitical reasons. On this point a caveat is necessary - while the EU security of gas supply debate is often exclusively concentrated on Russia and on the related fears about its geopolitical use of gas, the issue is in reality much wider because it potentially encompasses gas supplies from all suppliers, which might be interrupted for either technical or geopolitical reasons. For instance, a traditionally secure supplier as Norway might need to reduce its gas exports in the future simply because of depleting resources, or Algeria, another traditionally secure supplier, might cut its supplies in case of unpredictable regional political turbulence. Security of gas supply is therefore an issue that concerns all EU member states. The EU’s vulnerability to gas import disruptions is set to remain because, even assuming a stagnant outlook for EU gas demand, import requirements will likely grow because of rapidly declining domestic production. In the Netherlands, gas production dropped from 70 billion cubic metres (bcm) in 2010 to 56 bcm in 2014. This declining trend is set to accelerate after the production cap imposed in 2015 on Europe's largest gas field – Groningen – because of more powerful and more frequent earthquakes resulting from the extraction activities. The United Kingdom’s gas production volume declined from 57 bcm in 2010 to 37 bcm in 2014, mainly because of the rapid depletion of resources in the North Sea. According to the International Energy Agency (IEA, 2015), the EU’s import requirements will increase in all scenarios.
    Date: 2016–01

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