nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2016‒07‒09
twenty papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The Impact of the Implementation of Council Directives on Labour Migration Flows from Third Countries to EU Countries By Tommaso Colussi
  2. The Impact of Intra-EU Mobility on Immigration by Third-Country Foreign Workers By Emily Farchy
  3. What drives European multinationals to the EU neighbouring countries? A mixed methods analysis of Italian investment strategies By Andrea Ascani; Riccardo Crescenzi; Simona Iammarino
  4. A descriptive analysis of immigration to and emigration from the EU: Where does the EU stand within OECD? By Anda David; Jean-Noël Senne
  5. Explaining the Interplay of Three Markets: Green Certificates, Carbon Emissions and Electricity By Schusser, Sandra; Jaraite, Jurate
  6. Internet and Voting in the Web 2.0 Era: Evidence from a Local Broadband Policy By Poy, Samuele; Schüller, Simone
  7. Does Return Migration Affect Health Outcomes in Macedonia? By Petreski, Marjan
  8. What are the Health effects of postponing retirement? An instrumental variable approach By Hagen, Johannes
  9. Immigration, Asylum, and Gender: Ireland and Beyond By Kevin Denny; Cormac Ó Gráda
  10. Is Childcare Bad for the Mental Health of Grandparents? Evidence from SHARE By Brunello, Giorgio; Rocco, Lorenzo
  11. A crime 2.0 - cybercrime, e-talent, and institutions By Seo-Young Cho
  12. Grandparental Availability for Child Care and Maternal Employment: Pension Reform Evidence from Italy By Massimiliano Bratti; Tommaso Frattini; Francesco Scervini
  13. Disentangling Adverse Selection, Moral Hazard and Supply Induced Demand: An Empirical Analysis of The Demand For Healthcare Services By Vincenzo Atella; Alberto Holly; Alessandro Mistretta
  14. Installation entries and exits in the EU ETS industrial sector By Stefano F. Verde; Christoph Graf; Thijs Jong and Claudio Marcantonini
  15. Migration, Labor Tasks and Production Structure in Europe. By Stefania Borelli; Giuseppe De Arcangelis
  16. Incorporating innovation subsidies in the CDM framework: Empirical evidence from Belgium By Czarnitzki, Dirk; Delanote, Julie
  17. The Changing Nature of Gender Selection into Employment: Europe over the Great Recession By Dolado, Juan J.; Garcia-Penalosa, Cecilia; Tarasonis, Linas
  18. Illicit Financial Flows: concepts and first macro estimates for Belgium and its 18 preferred partner countries. By Jozef Pacolet; Joris Vanormelingen
  19. The impact of immigration on output and its components: A sectoral analysis for Italy at regional level By Etzo, Ivan; Massidda, Carla; Piras, Romano; Mattana, Paolo
  20. Institutions vs. ‘First-Nature’ Geography – What Drives Economic Growth in Europe’s Regions? By Tobias Ketterer; Andrés Rodríguez-Pose

  1. By: Tommaso Colussi
    Abstract: This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895) A previous version of this paper (DELSA/ELSA/MI(2015)4) was presented and discussed at the OECD Working Party on Migration in June 2015. The paper assesses the impact of three European Directives – Student Directive, Researcher Directive and the Blue Card Directive – on migration flows from third countries to the EU. Using a difference-in-difference empirical strategy and data from the EU-LFS and Eurostat database on work permits to non-EU workers, it estimates the effect of each Directive on the inflow of targeted third country nationals. Overall, the econometric analysis does not provide evidence of a direct impact of the implementation of either of the Directives on the inflow of targeted groups. Most member states did experience an increase in the inflow of non-EU high skilled workers after the adoption of the Blue Card Directive; however, this increase can be almost entirely explained by positive pre-existing trends in the inflow of this type of immigrants. Similarly, despite the increase in the number of permits issued to students and researchers from third countries in Europe, difference-in-differences estimates do not provide evidence of a direct effect of the implementation of the Student and Researcher Directive on changes in this type of inflows. The absence of a measurable impact of the three Directives analysed may be due to delayed effects of policy changes, which take time to filter into perception and thus affect immigrant inflows to Europe.
    JEL: F22 J61 K37 R23
    Date: 2016–06–24
  2. By: Emily Farchy
    Abstract: This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895) A previous version of this paper (DELSA/ELSA/MI(2015)10) was presented and discussed at the OECD working party on migration in June 2015 This paper examines the impact of the free flow of migrants within the EU on the prospects of labour migrants from third countries - the extent to which free movement migrants and third country migrants are substitutes or complements on the labour market. The first section of this paper looks at the recent trends in migration to the European Union, with a particular focus on trends in the ‘big five’ recipient countries. The analysis is supplemented by the use of micro data from the EU Labour Force Survey, to examine the extent to which the socio-economic and job characteristics suggest that EU migrants and third country migrants provide a similar labour input. Aggregate migrant flows, however, are driven by both supply and demand factors; a comparison of aggregate trends is therefore insufficient to disentangle the disparate drivers of these trends. A booming economy, for example, will attract labour migrants from both EU and third countries, yet the positive relation between these flows cannot be attributed to a complementarity between these labour inputs but rather to the demand side factors that drive them both. To overcome this endogeneity the second section of this paper utilizes the natural experiment of EU enlargement to isolate the impact of the increased supply of free movement migrants on third country migrant populations. Abstracting in this manner from the economic factors that have played such an important role in determining labour demand in recent years the empirical analysis of this paper identifies a negative impact on the arrivals of third country migrants when labour supply from new EU migrants increases. Furthermore, the lack of identifiable impact on the employment rate of third country migrants is dependent on assumptions regarding the counterfactual employment outcomes of these displaced third country migrants.
    JEL: F22 J61 R23
    Date: 2016–06–24
  3. By: Andrea Ascani; Riccardo Crescenzi; Simona Iammarino
    Abstract: This paper aims to investigate the economic integration between the European Union and its neighbouring countries by exploring the location drivers of Italian Multinational Enterprises (MNEs) in 33 destination countries including the New Member States of the European Union (NMs) and the European Neighbouring countries (NCs). The paper compares market- and efficiency-seeking motivations with asset-seeking strategies. The analysis is based on a mixed-method approach. The quantitative analysis assess the location determinants of 518 Italian MNEs that invested in the area in the years 2003-2008, while qualitative information on strategic location decisions is collected by means of in-depth interviews with executives in two of the largest Italian MNEs active in the region. Market-seeking considerations are still predominant drivers of location decisions in EU Neighbouring Countries together with resource-seeking motivations. However, different MNEs develop diversified strategies to increase their access to these areas which are of increasing interest for global investors.
    Keywords: European Union; European Neighbourhood Policy (ENP); multinationals; FDI
    JEL: F23 P33 R30
    Date: 2016
  4. By: Anda David; Jean-Noël Senne
    Abstract: This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895) A previous version of this paper was presented and discussed at the OECD Working Party on Migration in June 2015. The paper examines immigration to, and emigration from, the European Union, and compares them with migrant inflows and outflows to other OECD destinations. It investigates how the migrants are distributed in terms of gender, age, education and labour force status, depending on their country of origin as well as of destination. Drawing upon the Database on Immigrants in the OECD countries (DIOC), changes in migration rates and stock are analysed over time, focusing on whether the EU is facing a net gain or loss of skills.
    JEL: F22 J11 N34
    Date: 2016–06–24
  5. By: Schusser, Sandra (CERE and the Department of Forest Economics, SLU); Jaraite, Jurate (CERE and the Department of Economics, Umeå University)
    Abstract: The European Union's Emissions Trading System (EU ETS) and the Swedish-Norwegian Tradable Green Certicate System (Swedish-Norwegian TGC system) are two market-based instruments that have the overlapping goal to mitigate greenhouse gas (GHG) emissions by shifting economies to cleaner energy sources. Understanding the price signals and interactions of these two newly created markets is essential for all decisions makers, regulators and direct market participants, who aim to reach the predefined environmental policy goals in the most efficient manner. The interaction between these policy instruments has been widely examined from the theoretical perspective. This research contributes to the literature by empirically examining the interplay between the prices of three markets: (1) the price of tradable green certificates in the Swedish-Norwegian TGC system, (2) the price of carbon in the EU ETS and (3) the price of electricity in Nord Pool. We use a multivariate vector-autoregression (VAR) approach to take into account the endogenous relationships between these prices. To date, our empirical results do not support the theoretical considerations that the impacts of carbon price on green certicate prices and on renewable electricity production are negative. Contrary, we find that, to date, increases in carbon prices positively affect green certificate prices at least in the short-run.
    Keywords: Renewable energy; Electricity; Green certificates; Emissions trading; EU ETS; interactions; tradable green certificates; Sweden; VAR model
    JEL: Q28 Q41 Q42 Q48
    Date: 2016–06–01
  6. By: Poy, Samuele (Università Cattolica del Sacro Cuore); Schüller, Simone (CESifo)
    Abstract: This article analyzes the impact of a local broadband expansion policy on electoral turnout and party vote share. We exploit a unique policy intervention involving staged broadband infrastructure installation across rural municipalities in the Province of Trento (Italy), thus generating a source of exogenous (spatial and temporal) variation in the provision of advanced broadband technology (ADSL2+). Using a difference-in-differences strategy, we find positive effects of broadband availability on overall electoral turnout at national parliamentary elections. Party vote share analysis shows significant shifts across the ideological spectrum. These shifts, however, are likely transitory rather than persistent. Placebo estimations support a causal interpretation of our results. We provide further evidence that broadband availability is linked to actual adoption in that the broadband policy increased overall Internet and broadband take-up among private households.
    Keywords: broadband internet, political participation, voting behavior, quasi-natural experiment
    JEL: D72 L82 L86
    Date: 2016–06
  7. By: Petreski, Marjan
    Abstract: The objective of the paper is twofold: i) to investigate if living and working abroad has a meaningful role to play for the health of the return migrant; and ii) to understand if there are any spillovers of return-migrant member onto health conditions of the family members left behind. To that end, we use the DoTM Migration Survey 2009, as well a propensity score matching to address selectivity on observables and IV for the selectivity on unobservables. We also pursue interviews to contextualize the return migration – health nexus. Results suggest that when equalized on observables, return migrants have better health than non-migrants. Though, the reverse causality channel (less healthy individuals are more inclined to return) works to attenuate the true effect of return migration on health. Results further suggest a positive spillover effect of return migration on the health of the family members left behind, being mainly driven by the work of remittances sent while abroad, and not the returned wealth or the health knowledge transfer.
    Keywords: return migration, health, Macedonia
    JEL: F22 I19
    Date: 2016–05
  8. By: Hagen, Johannes (Department of economics, Uppsala university)
    Abstract: This essay estimates the causal effect of postponing retirement on a wide range of health outcomes using Swedish administrative data on cause-specific mortality, hospitalizations and drug prescriptions. Exogenous variation in retirement timing comes from a reform which raised the age at which broad categories of Swedish local government workers were entitled to retire with full pension benefits from 63 to 65. Instrumental variable estimation results show no evidence that postponing retirement impacts mortality or health care utilization.
    Keywords: Health; mortality; Health care; pension reform; retirement
    JEL: I18 J22 J26
    Date: 2016–06–15
  9. By: Kevin Denny; Cormac Ó Gráda
    Abstract: The paper employs recent data from the European Social Survey and Eurobarometer to place evolving Irish attitudes to immigration in comparative context. Particular attention is given to determinants of differences in attitudes by gender, xenophobia, and exaggerated impressions of the immigrant presence.
    Keywords: Immigration; Gender; Xenophobia
    JEL: J61
    Date: 2016–06
  10. By: Brunello, Giorgio (University of Padova); Rocco, Lorenzo (University of Padova)
    Abstract: We estimate the causal effects of regular and occasional grandchild care on the depression of grandmothers and grandfathers, using data from the Survey on Health, Ageing and Retirement in Europe and an instrumental variables strategy which exploits the variation in the timing of interviews across individuals and the fact that childcare declines with the age of grandchildren. We find that 10 additional hours of childcare per month, a 31 percent increase with respect to the sample average, increases the probability of developing depressive symptoms by 3.0 to 3.2 percentage points for grandmothers and by 5.4 to 5.9 percentage points for grandfathers. These results suggest that policies that substitute informal with formal childcare can improve the mental wellbeing of grandparents.
    Keywords: childcare, grandparents, depression, Europe
    JEL: J13 I12
    Date: 2016–06
  11. By: Seo-Young Cho (University of Marburg)
    Abstract: Cybercrime is typically profiled as a skill-intensive crime committed by educated, young criminals. This observation raises the controversial question of whether advanced knowledge and skills are a pull factor of cybercrime. In this paper, the linkage between e-skills and cybercrime is investigated using statistics from up to 28 European countries. Through the investigation, it is shown that electronic skills induce more cybercrime under weak institutions where the rules of law do not provide protection and incentives for productive entrepreneurial activities. This compound effect between e-skills and institutions suggests that institutional factors are crucial to allocating human capital between productive and criminal activities in cyberspace.
    Keywords: cybercrime, e-skills, institutions, entrepreneurship
    JEL: E24 K42 O15
    Date: 2016
  12. By: Massimiliano Bratti; Tommaso Frattini; Francesco Scervini
    Abstract: In this paper, we exploit pension reform-induced changes in retirement eligibility requirements to assess the role of grandparental child care availability in the employment of women who have children under 15. We focus on Italy for two reasons: first, it has low rates of female employment and little formal child care provision, and second, it has undergone several pension reforms in a relatively short time span. Our analysis shows that, among the women studied, those whose own mothers are retirement eligible have a 13 percent higher probability of being employed than those whose mothers are ineligible. The pension eligibility of maternal grandfathers and paternal grandparents, however, has no significant effect on the womenÕs employment probability. We also demonstrate that the eligibility of maternal grandmothers mainly captures the effect of their availability for child care. Hence, pension reforms, by potentially robbing households of an important source of flexible, low-cost child care, could have unintended negative consequences for the employment rates of women with children. Length: 45 pages
    Keywords: grandparental child care, maternal employment, pension reform, retirement
    Date: 2016–06
  13. By: Vincenzo Atella (CEIS,University of Rome "Tor Vergata"); Alberto Holly (IEMS University of Lausanne, Universidade Nova de Lisboa, Lisbon,); Alessandro Mistretta (Bank of Italy and Università di Roma Tor Vergata.)
    Abstract: In the healthcare sector, Adverse Selection (AS), Moral Hazard (MH) and Supply Induced Demand (SID) are three very important phenomena that affect patients' behaviour. Despite there exists a vast theoretical and empirical literature on these phenomena, so far, no contribution has been able to approach them jointly. This is mostly due to the difficulty to model the joint determinants of health service utilisation and health insurance choice by means of a tractable structural simultaneous equation model. In this paper, we provide a solution to this problem and estimate a simultaneous four equation structural model with four latent variables, where the first two equations are meant to deal with the adverse selection issue, while the third and fourth equation deal with moral hazard and SID issues. A closed form solution for the likelihood function - which guarantees an exact solution - is maximised by the means of FIML, using a large cross-sectional dataset from the Italian healthcare system. Empirical analysis has confirmed the theoretical predictions of our structural model. In particular, we find evidence of AS in the choice of private insurance and SID, but do not find MH behaviour on the patient side. These results are extremely important from a health policy perspective, given the existing debate on the development of a second pillar in the financing of the healthcare system in Italy and Europe.
    Keywords: Quadrivariate probit, FIML, Supply induced demand, Moral hazard, Adverse selection, Health insurance.
    JEL: I13 I11 D82 C35
    Date: 2016–06–28
  14. By: Stefano F. Verde; Christoph Graf; Thijs Jong and Claudio Marcantonini
    Abstract: Focusing on the industrial sector of the EU ETS, this study identifies and analyses the entries and the exits of installations into and from the system over the period 2005-2013. The overall number of exits was notable relative to the number of installations, and significantly greater than that of the entries. Further, we estimate a hazard model for the risk of an installation exiting the EU ETS, which identifies a number of different factors referring to the installation, the firm, and the economy, explaining the occurrence of this event. In addition to these, an “end-of-phase effect” is found, whereby the chances of exit were significantly higher in the final years of the EU ETS Phases I and II. This effect, related to the rules concerning the closure of an installation and the withdrawal of the relative allowances, is detrimental to the allocative efficiency of the system and, therefore, to its cost-effectiveness in emissions abatement. The evidence provided by the study and some of its methodological aspects may be useful for future attempts to identify investment leakage in the EU ETS.
    Keywords: EU ETS, entries and exits, manufacturing sector, hazard model, end-of-phase effect
    Date: 2016–03
  15. By: Stefania Borelli (Dipartimento di Scienze Sociali ed Economiche, Sapienza-Università di Roma); Giuseppe De Arcangelis (Dipartimento di Scienze Sociali ed Economiche, Sapienza-Università di Roma)
    Abstract: This paper assesses the effect of the immigration on the production structure in a selection of European countries in 2001-2009 with a task-based approach. The infl ow of immigrants represents an increase in the relative supply of manual-physical (or simple) tasks, hence favoring simple-task intensive sectors. We use a new OECD dataset, PIAAC, to calculate the index of simple-task intensity at the country-industry level. The analysis con rms that the increase in migration stocks caused a positive impact on the value added of sectors that use more intensively simple tasks. These effects are more intense when considering countries as Italy and Spain characterized by a recent, rapid and intense in flow of migrants. Endogeneity issues are discussed and instruments based on a gravity approach are used in estimation.
    Keywords: Rybczynski Effect, International Migration, PIAAC, Gravity Equation.
    JEL: F22 C25
    Date: 2016–05
  16. By: Czarnitzki, Dirk; Delanote, Julie
    Abstract: This paper integrates innovation input and output effects of R&D subsidies into a modified Crépon-Duguet-Mairesse (CDM) model. Our results largely confirm insights of the input additionality literature, i.e. public subsidies complement private R&D investment. In addition, results point to positive output effects of both purely privately funded and subsidy-induced R&D. Furthermore, we do not find evidence of a premium or discount of subsidy-induced R&D in terms of its marginal contribution on new product sales when compared to purely privately financed R&D.
    Keywords: CDM model,R&D,subsidies,innovation policy
    JEL: C14 C30 O38
    Date: 2016
  17. By: Dolado, Juan J.; Garcia-Penalosa, Cecilia; Tarasonis, Linas
    Abstract: The aim of this paper is to evaluate the role played by selectivity issues induced by nonemployment in explaining gender wage gap patterns in the EU since the onset of the Great Recession. We show that male selection into the labour market, traditionally disregarded, has increased. This is particularly the case in peripheral European countries, where dramatic drops in male unskilled jobs have taken place during the crisis. As regards female selection, traditionally positive, we document mixed findings. While it has declined in some countries, as a result of increasing female LFP due to an added-worker effect, it has become even more positive in other countries. This is due to adverse labour demand shifts in industries which are intensive in temporary work where women are over-represented. These adverse shifts may have more than offset the rise in unskilled female labour supply.
    Date: 2016–06
  18. By: Jozef Pacolet (HIVA, KU Leuven); Joris Vanormelingen (HIVA, KU Leuven)
    Abstract: There is a growing awareness that illicit financial flows and the shadow economy might have a substantial impact on the financing of development. This paper provides a disentanglement of the definitions, sources and causes and measurement methodologies used and a first quantitative estimate for the 18 partner countries for development of Belgium. An overview of methodologies for defining the shadow economy, the informal economy, illicit financial flows and capital export has been provided, and based on those secondary sources a first macro estimate of their size has been provided for the 18 preferred partner countries for Belgian governmental development cooperation, together with some core macro-economic indicators. As a benchmark similar information is provided for the ‘Low Countries’ or Benelux. All those studies on the underground economy are in search of a ‘dark figure’ that risks to become, as some scholars call it, ‘facts by repetition’. More than 2 trillion euro undeclared economy in the EU, 1 trillion euro missed tax revenue in the same EU, they became officially quoted figures but they go back to the same, sometimes criticised source of information. Almost 1 trillion USD illicit financial flows worldwide is a similar fact that is cited over and over again. But it remains the best practical starting point to look for further evidence or understanding of those phenomena in the 18 partner countries. 46 billion USD illicit financial flows or 3.5% of their GDP are estimated for the 18 partner countries of Belgium (around 2012). 261 billion USD estimated underground economy or some 31.6% of GDP of those 18 countries (around 2007). Ten times more, as share of GDP. Both figures reveal the massive potential importance for financing of development.
    Keywords: illicit financial flows, financing for development
    JEL: F39
    Date: 2015–07
  19. By: Etzo, Ivan; Massidda, Carla; Piras, Romano; Mattana, Paolo
    Abstract: This paper studies how immigrants impact on Italian economy. The issue is addressed following the channel output decomposition approach by means of which the effect of immigration is measured with respect to per capita value added and its components. The investigation is carried out at sector level during the 2008–2011 time period. The results show that the main channel through which migration impacts on value added varies on sectoral basis. While at aggregate level, in Manufacturing and in Other Services the impact goes mainly through capital intensity, in the Construction and in the Commerce sectors the principal channel is via total factor productivity.
    Keywords: channel output decomposition approach, immigrants.
    JEL: F22 F62 J61
    Date: 2016–05
  20. By: Tobias Ketterer; Andrés Rodríguez-Pose
    Abstract: The debate on whether institutions or geography prevail in driving economic growth has been rife (e.g. Sachs 2003 vs. Rodrik et al. 2004). Most of the empirical analyses delving into this debate have focused on world countries, whose geographical and institutional conditions differ widely. Subnational analyses considering groups of countries with, in principle, more similar institutional and geographical conditions have been limited and tended to highlight that geography is more important than institutions at subnational level. This paper aims to address whether this is the case by investigating how differences in institutional and ‘first-nature’ geographical conditions have affected economic growth in Europe’s regions in the period 1995-2009. In the analysis we use a newly developed dataset including regional quality of government indicators and geographical charactersitics and employ 2-SLS and IV-GMM estimation techniques with a number of regional historical variables as instruments. Our results indicate that at a regional level in Europe institutions rule. Regional institutional conditions – and, particularly, government effectiveness and the fight against corruption – play an important role in shaping regional economic growth prospects. This does not imply, however, that geography is irrelevant. There is evidence of geographical factors affecting regional growth, although their impact is dwarfed by the overriding influence of institutions.
    Keywords: Regional economic growth, institutions, geography, quality of government, NUTS-2 regions, Europe
    JEL: R11 O11 O43
    Date: 2016–06

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