nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2016‒08‒14
thirteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. A clash of generations? Increase in Retirement Age and Labor Demand for Youth By Boeri, Tito; Garibaldi, Pietro; Moen, Espen R
  2. Do tax Incentives for Research Increase Firm Innovation? An RD Design for R&D By Antoine Dechezleprêtre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen
  3. New Evidence on Trust and Well-being By John F. Helliwell; Haifang Huang; Shun Wang
  4. Can’t work or won’t work: quasi-experimental evidence on work search requirements for single parents By Silvia Avram; Mike Brewer; Andrea Salvatori
  5. Consumption during the Great Recession in Italy By Martina Celidoni; Michele De Nadai; Guglielmo Weber
  6. Income and Wealth Poverty in Germany By Theresa Köhler
  7. Science, university-firm R&D collaboration and innovation across Europe By Barra, Cristian; Maietta, Ornella Wanda; Zotti, Roberto
  8. The Role of Fees in Foreign Education: evidence from Italy and the UK By Michel Beine; Marco Delogu; Lionel Ragot
  9. Court Efficiency and Procurement Performance By Coviello, Decio; Moretti, Luigi; Spagnolo, Giancarlo; Valbonesi, Paola
  10. "GMO" maize and public health. A little case of Schumpeterian policy in the EU By Tagliabue, Giovanni
  11. Research Funding and Regional Economies By Nathan Goldschlag; Stefano Bianchini; Julia Lane; Joseba SanMartin Sola; Bruce Weinberg
  12. Housing equity, saving and debt dynamics over the Great Recession By William Elming; Andreas Ermler
  13. No Pain, No Gain: The Effects of Exports on Effort, Injury, and Illness By David Hummels; Jakob Munch; Chong Xiang

  1. By: Boeri, Tito; Garibaldi, Pietro; Moen, Espen R
    Abstract: Most European countries experienced a dramatic increase in youth unemployment since the Great Recession of 2007-2009. For the Euro area as a whole, employment in the 15-24 age group declined by almost 17% over a 6 years span, in Southern Europe declines ranged between 34% (Italy) and 57% (Spain). Demographic and institutional developments cannot, by themselves, account for these dramatic changes in the structure of employment by age groups. This paper evaluates whether and to which extent the increase in the retirement age introduced in several countries in the middle of the recession could have contributed to divergent dynamics of employment rates at the two extremes of the age distribution. We take Italy as a case study as a major reform took place in December 2011 increasing the retirement by up to five years for some categories of workers. We have access to a unique dataset from the Italian social security administration (INPS) identifying in each private firm the fraction of workers hit by the increase in the retirement age. We look at the dynamics of youth hirings in the same firms as well as in firms where no workers were locked-in. Our results clearly indicate that before and after the reform, firms that were more exposed to the increase in employment duration of senior workers significantly reduced youth hirings. The results are also quantitatively sizeable. We estimate that a lock-in of five workers for one year reduces youth hiring of approximately one full time equivalent worker. Overall, out of a total loss of 150 thousand youth jobs, 36 thousand losses can be attributed to the reform. A variety of robustness tests confirm our findings.
    Keywords: labor demand; lump-of-labor; Pension Reforms; youth unemployment
    JEL: H55 J0
    Date: 2016–08
  2. By: Antoine Dechezleprêtre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen
    Abstract: We present evidence of a causal impact of research and development (R&D) tax incentives on innovation. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting (even when quality-adjusted). R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population of smaller firms and subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design. Over the 2006-11 period aggregate business R&D would be around 10% lower in the absence of the tax relief scheme. We also show that the R&D generated by the tax policy creates positive spillovers on the innovations of techno-logically related firms.
    JEL: O31
    Date: 2016–07
  3. By: John F. Helliwell; Haifang Huang; Shun Wang
    Abstract: This paper first uses data from three large international surveys – the Gallup World Poll, the World Values Survey and the European Social Survey – to estimate income-equivalent values for social trust, with a likely lower bound equivalent to a doubling of household income. Second, the more detailed and precisely measured trust data in the European Social Survey (ESS) show that social trust is only a part of the overall climate of trust. While social trust and trust in police are the most important elements, there are significant additional benefits from trust in three aspects of the institutional environment: the legal system, parliament and politicians. Thus estimates of the total well-being value of a trustworthy environment are larger than those based on social trust alone. Third, the ESS data show that living in a high-trust environment makes people more resilient to adversity. Being subject to discrimination, ill-health or unemployment, although always damaging to subjective well-being, is much less damaging to those living in trustworthy environments. These results suggest a fresh set of links between trust and inequality. Individuals who are subject to discrimination, ill-health or unemployment are typically concentrated towards the lower end of any national distribution of happiness. Thus the resilience-increasing feature of social trust reduces well-being inequality by channeling the largest benefits to those at the low end of the well-being distribution.
    JEL: I31 J15 O57
    Date: 2016–07
  4. By: Silvia Avram (Institute for Fiscal Studies); Mike Brewer (Institute for Fiscal Studies and University of Essex); Andrea Salvatori (Institute for Fiscal Studies)
    Abstract: Increasing the labour market participation of single parents, whether to boost incomes or reduce welfare spending, is a major policy objectives in a number of countries. This paper presents causal evidence on the impact of work search requirements on single parents’ transitions into work and onto other benefits. We use rich administrative data on all single parent welfare recipients, and apply a difference-in-differences approach that exploits the staggered roll-out of a reform in the UK that gradually decreased the age of the youngest child at which single parents lose the right to an unconditional cash benefit. Consistent with the predictions of a simple search model, the work search requirements have heterogeneous impacts, leading some single parents to move into work (especially those with strong previous labour market attachments), but leading some (especially those with weak previous labour market attachments) to move onto disability benefits (with no search conditionalities) or non-claimant unemployment.
    Keywords: Employment
    Date: 2016–07–28
  5. By: Martina Celidoni (Institute for Fiscal Studies); Michele De Nadai (Institute for Fiscal Studies); Guglielmo Weber (Institute for Fiscal Studies and University of Padua)
    Abstract: We use Italian micro data to investigate how consumers reacted to the Great Recession. In particular, we study the age profiles of non-durable consumption, durable purchases and wealth over the 2008-2012 period for different year-of-birth cohorts, and how they departed from the way they would have been had consumer behavior been the same as it was over the 1995-2006 period. We find that consumption dropped most for younger households - only part of these drops can be explained by the increase in unemployment. We also investigate whether the crisis had an impact on the way consumers allocate their spending among broad consumption bundles. We find that the budget elasticity of the demand for food changed during the recession period, particularly among the young.
    Keywords: Great Recession, consumption
    Date: 2016–07–20
  6. By: Theresa Köhler
    Abstract: In general, poverty measures are estimated by applying income information. However, only using income data for calculating relative poverty might lead to an incomplete view. For example, a household can be under a poverty threshold even if a household member owns real estate or equity. In this thesis, at risk of income poverty in Germany is estimated. In order to get a more complete picture of at risk of poverty, a multidimensional approach is applied. Not only at risk of income poverty, also at risk of wealth poverty is measured. Moreover, households that are both at risk of income and wealth poor are analyzed. Furthermore, several poverty groups are identified: twice-poor which are households that are, at risk of income and wealth poverty; protected-poor, households that are at risk of income poverty but not at risk of wealth poverty; vulnerable-poor, households which are at risk of wealth poverty but not at risk of income poverty; non-poor, households which are either at risk of income poverty nor at risk of wealth poverty. Poverty profiles in Germany and their changes over time are analyzed for the years 2002, 2007 and 2012. In fact, it is investigated to which degree at risk of poverty rates differ in socio-economic characteristics. A logit regression is applied for each dimension and each wave for estimation. For robustness checks, 95 percent bootstrap confidence intervals are calculated for all results. Findings suggest that young age, region East Germany, single, lone parent, unemployment and low education are factors that condition the at risk of poverty rates. The definition of a certain rate influences the percentage of households that are affected by at risk of poverty, however, has a limited effect on poverty profiles. Poverty profiles have not changed over time but some factors such as unemployment and low education have significantly increased.
    Date: 2016
  7. By: Barra, Cristian; Maietta, Ornella Wanda; Zotti, Roberto
    Abstract: According to the National Innovation System (NIS) approach, the innovative capabilities of a firm are explained by its interactions with other national agents involved in the innovation process and by formal and informal rules that regulate the system. This paper intends to verify how product and process innovation in the European food and drink industry are affected by: i) the NIS structure in terms of universities vs public research labs, faculties/department mix and size; ii) the NIS output in terms of WoS indexed publications vs the supply of graduates; iii) the NIS fragmentation and coordination and iv) the NIS scientific impact and specialisation.The source of data on firm innovation is the EU-EFIGE/Bruegel-UniCredit dataset supplemented by information from the International Handbook of Universities, Eurostat and the bibliometric analysis of academic research quality. The results obtained suggest that large size of public research institutions are detrimental to interactions between university and industry and the indicators used for public research assessment are not appropriate proxies of local knowledge spillovers.
    Keywords: university–industry interaction, firm R&D collaboration, product and process innovation, academic research quality, university education, Research and Development/Tech Change/Emerging Technologies, O3, I23, D22, R1,
    Date: 2016–06–17
  8. By: Michel Beine (CREA, Université du Luxembourg); Marco Delogu (CREA, Université du Luxembourg); Lionel Ragot (Université de Paris Ouest)
    Abstract: This paper studies the determinants of international students mobility at the university level, focusing specifically on the role of tuition fees. We derive a gravity model based on a Random Utility Maximization model of location choice for international students. The last layer of the model is estimated using new data on students migration flows at the university level for Italy and the UK. The particular institutional setting of the two destinations countries allows to control for the potential endogeneity of tuition fees. We obtain evidence for a clear and negative effect of fees on international student mobility and confirm the positive impact of quality of education. The estimations find also support for an important role of additional destination-specific variables such as host capacity, expected return of education and cost of living in the vicinity of the university.
    Keywords: Foreign Students, Tuition fees, Location choice, University quality
    JEL: F22 H52 O16
    Date: 2016
  9. By: Coviello, Decio; Moretti, Luigi; Spagnolo, Giancarlo; Valbonesi, Paola
    Abstract: Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, therefore inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. We find that where courts are inefficient: i) public works are delivered with longer delays; ii) delays increase for more valuable contracts; iii) contracts are more often awarded to larger suppliers; and iv) a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.
    Keywords: Court efficiency; public procurement; time incentives; performance in contract execution; delay; litigation; enforcement cost.
    JEL: H41 H57 K41
    Date: 2016–08
  10. By: Tagliabue, Giovanni
    Abstract: EU lawmakers have been successfully struggling for a quarter of a century to refuse the cultivation of “Genetically Modified Organisms” on the Old Continent. A clear example is given by the revision of the accepted level of contaminants in maize: rather than admitting that Bt maize is safer than “non-GMO” varieties, and therefore European farmers should be allowed not only to import it, but also to produce it, politicians have raised the threshold of the poisonous fumonisins that may be legally present in food and feed. This decision is an example of a “Schumpeterian” approach to policy, where public choices are not inspired by a science-based mind-set, but are substantially dictated by a calculus of consent: most probably, EU politicians reckoned that an adjustment of the legal level of food poison would have cost them less than the possible outrage deriving from encouraging “GMO” cultivation.
    Keywords: GMO maize, Fumonisins, EU biotech regulation, Schumpeterian policy, Food Consumption/Nutrition/Food Safety, Political Economy, K32, Q18,
    Date: 2016–06–17
  11. By: Nathan Goldschlag; Stefano Bianchini; Julia Lane; Joseba SanMartin Sola; Bruce Weinberg
    Abstract: Public support of research typically relies on the notion that universities are engines of economic development, and that university research is a primary driver of high wage localized economic activity. Yet the evidence supporting that notion is based on aggregate descriptive data, rather than detailed links at the level of individual transactions. Here we use new micro-data from three countries - France, Spain and the United States - to examine one mechanism whereby such economic activity is generated, namely purchases from regional businesses. We show that grant funds are more likely to be expended at businesses physically closer to universities than at those farther away. In addition, if a vendor has been a supplier to a grant once, that vendor is subsequently more likely to be a vendor on the same or related grants. Firms behave in a way that is consistent with the notion that propinquity is good for business; if a firm supplies a research grant at a university in a given year it is more likely to open an establishment near that university in subsequent years than other firms.
    Keywords: Science policy, innovation, regional economic development, UMETRICS
    Date: 2016–07
  12. By: William Elming (Institute for Fiscal Studies and Institute for Fiscal Studies); Andreas Ermler (Institute for Fiscal Studies)
    Abstract: This paper uses the large and heterogeneous house price shocks in Denmark from 2006-2009 to provide new evidence on the contested determinants of the correlation between house prices and saving. Crucially, to compare the savings behaviour of home-owners who experienced di fferent house price shocks but similar shocks to income expectations, we exploit the structure of the wage setting process in the Danish public sector. We fi nd strong evidence of a causal link between changes in house prices and saving for young and old home-owners, both through a direct wealth eff ect and through housing equity serving as collateral or precautionary wealth.
    Keywords: Housing, Saving, Wealth e ect, Collateral, Debt dynamics
    JEL: D14 D91 E21 R20
    Date: 2016–08–02
  13. By: David Hummels; Jakob Munch; Chong Xiang
    Abstract: Increased job effort can raise productivity and income but put workers at increased risk of illness and injury. We combine Danish data on individuals’ health with Danish matched worker-firm data to understand how rising exports affect individual workers’ effort, injury, and illness. We find that when firm exports rise for exogenous reasons: 1. Workers work longer hours and take fewer sick-leave days; 2. Workers have higher rates of injury, both overall and correcting for hours worked; and 3. Women have higher sickness rates. For example, a 10% exogenous increase in exports increases women’s rates of injury by 6.4%, and hospitalizations due to heart attacks or strokes by 15%. Finally, we develop a novel framework to calculate the marginal dis-utility of any non-fatal disease, such as heart attacks, and to aggregate across multiple types of sickness conditions and injury to compute the total utility loss. While the ex-ante utility loss for the average worker is small relative to the wage gain from rising exports, the ex-post utility loss is much larger for those who actually get injured or sick.
    JEL: F1 F6 I1 J2 J3
    Date: 2016–07

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