nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2017‒08‒20
nineteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Firm age and the probability of product innovation. Do CEO tenure and product tenure matter? By Marco Cucculelli
  2. Quantile treatment effects of Riester participation on wealth By Ihle, Dorothee
  3. Matching efficiency and labour market heterogeneity in the United Kingdom By Pizzinelli, Carlo; Speigner, Bradley
  4. Social Tenants' Health: Evaluating the Effectiveness of Landlord Interventions By Paul Cheshire; Stephen Gibbons; Jemma Mouland
  5. The effects of Germany's new minimum wage on employment and welfare dependency By Schmitz, Sebastian
  6. Shopping externalities and retail concentration: Evidence from Dutch shopping streets By Koster, Hans R.A.; Pasidis, Ilias; van Ommeren, Jos
  7. The profitability of banks in a context of negative monetary policy rates: the cases of Sweden and Denmark By Madaschi, Christophe; Nuevo, Irene Pablos
  8. Work organisation, human capital and innovation strategies: new evidence from firm-level Italian data By Capriati, Michele; Divella, Marialuisa
  9. Loan characteristics, firm preferences and investment: Evidence from a unique experiment By Brutscher, Philipp-Bastian; Heipertz, Jonas; Hols, Christopher
  10. The Impact of Tobacco Control Policies on Smoking Initiation in Europe By Jan (J.C.) van Ours; Ali Palali
  11. The Growth Disease at 50 – Baumol after Oulton By Jochen Hartwig; Hagen Krämer
  12. A multilevel latent Markov model for the evaluation of nursing homes' performance By Montanari, Giorgio E.; Doretti, Marco; Bartolucci, Francesco
  13. The health benefits of a targeted cash transfer: the UK Winter Fuel Payment By Crossley, Thomas F.; Zilio, Federico
  14. Tailored Feedback and Worker Green Behavior: Field Evidence from Bus Drivers By Adriaan (A.R.) Soetevent; Gert-Jan Romensen
  15. Public-private wage differences in the Western Balkan countries By Vladisavljević, Marko; Narazani, Edlira; Golubović, Vojin
  16. Secrecy, information shocks, and corporate investment : Evidence from European Union countries By Mazboudi, Mohamad; Hasan, Iftekhar
  17. To what extent does income predict an individual’s risk profile in the UK (2012- 2014) By Wright, Joshua
  18. The Effects of English Secondary School System Reforms (2002-2014) on Pupil Sorting and Social Segregation: A Greater Manchester Case Study By Ruth Lupton; Stephanie Thomson
  19. Sentencing in Ireland's First Bid-Rigging Cartel Case: An Appraisal By Gorecki, Paul

  1. By: Marco Cucculelli (Universita' Politecnica delle Marche, Dipartimento di Scienze economiche e sociali)
    Abstract: This paper examines the influence that the age of a firm has on the probability of product innovation by taking into account two factors: the role of the CEO's tenure and the lifecycle of the last product introduced. In a sample of Italian manufacturing firms (n = 2,163), analysis reveals that the new entrants’ high innovative activity is mainly driven by the new CEO's innovation propensity, which is strictly dependent on his tenure. Likewise, the lower innovation activity observed in mature firms is mostly explained by the dynamics of the product’s lifecycle and the CEO's tenure. More generally, the existence of a negative relationship between innovation and firm age is questioned, as controlling for time-related variables that overlap during the company's lifecycle - product age and CEO's tenure — turns the relationship positive. Finally, the innovative behaviour of incumbent companies turns out to be dependent on the renewal abilities of newly appointed external CEOs, whereas, CEOs from within the family play a minor role.
    Keywords: Product innovation, firm age, CEO tenure, product tenure, product lifecycle, industry lifecycle
    JEL: D22 G34 L25 O32
    Date: 2017–09
  2. By: Ihle, Dorothee
    Abstract: In numerous industrialized countries the demographic change erodes the financial basis of traditional pay-as-you-go pension systems. To compensate for decreasing statutory pensions, many governments incentivize private saving by means of subsidized retirement plans. In this context, Germany introduced the so-called Riester pension plans. To assess its effectiveness, this paper analyzes the effects of participation in Riester plans on wealth at different points of the distribution. We employ an instrumental quantile regression approach using Riester eligibility as instrument for Riester participation. The analysis is based on microeconomic survey data from the German Socio-Economic Panel of wave 2012. Results suggest substantial heterogeneity in the effect of Riester participation on wealth. While Riester participation increases total net wealth in the lower tail of the conditional distribution, it does not have a significant effect on households in the middle part of the distribution. In the upper tail of the conditional asset distribution, we find negative treatment effects providing weak evidence in favor of a mere reallocation of households' asset portfolios.
    Keywords: Saving Incentives,Retirement,Wealth Distribution,Instrumental Quantile Regression
    JEL: D31 D91 I38 J32
    Date: 2017
  3. By: Pizzinelli, Carlo (University of Oxford); Speigner, Bradley (Bank of England)
    Abstract: This paper investigates how compositional changes in the UK labour market affect the matching process between vacancies and job seekers. We augment a state space representation of the aggregate matching function with a measure of job seekers’ ‘search intensity’ that is recovered from micro-data on individual unemployment-to-employment transitions, in line with recent developments in the literature. The baseline results show that matching efficiency declined by around 15% between 1995 and 2010 but subsequently recovered by about 5 percentage points in the last six years. Compositional changes in the labour force that improved aggregate search intensity prior to the 2008 recession will tend to obscure the decline in aggregate matching efficiency unless controlled for properly. Considering broader definitions of job seekers that include marginally-attached workers and on-the-job searchers exacerbates the registered decline in matching efficiency. Changes in ‘recruiting intensity’ and the share of vacancies posted by different industries provide a potential explanation for some, but not all, of the initial fall in matching efficiency that preceded the 2007–08 recession. Finally, we quantitatively analyse how labour force heterogeneity and changes in matching efficiency have affected the shape and location of the UK Beveridge Curve.
    Keywords: Unemployment; labour heterogeneity; matching function; Beveridge Curve
    JEL: E24 E32 J64 J82
    Date: 2017–08–04
  4. By: Paul Cheshire; Stephen Gibbons; Jemma Mouland
    Abstract: Objectives: To test whether a social landlord can improve health outcomes for older tenants and reduce their NHS usage by simple interventions. Design: Randomised controlled trial. Setting: Social housing in five London Boroughs. Participants: 547 individuals over 50 years of age. Intervention: Baseline and two follow-up assessments of individual's health and use of medical services undertaken by health professionals. In the treated groups, individuals were given health care and support at two different levels. 25 individuals had to be removed from the trial because early assessments revealed critical and untreated health issues. Main outcome measures: Self-reported health and wellbeing ratings and NHS usage. Conclusions: Even simple interventions to a targeted group (older and poorer people), can produce significant reductions in NHS usage. Significant reductions were found for 1) planned hospital usage; 2) nights in hospital; and 3) for emergency GP usage. Well-being scores improved in the most strongly treated group but these were not statistically significant. Perhaps the single most important finding was that the early health evaluations revealed that 4.5% of the total sample - not in the most deprived section of the population - had such severe health problems that significant and immediate intervention was required.
    Keywords: randomised control trial, social housing, health interventions
    JEL: I18 C93 R29
    Date: 2017–08
  5. By: Schmitz, Sebastian
    Abstract: In January 2015, Germany introduced a federal, statutory minimum wage of 8.50 € per hour. This study evaluates the effects of this policy on regular and marginal employment and on welfare dependency. Based on county-level administrative data, this study uses the difference-in-differences technique, exploiting regional variation in the bite of the minimum wage, i.e. the county-specific share of employees paid less than 8.50 € before the introduction of the minimum wage. The minimum wage had a considerable negative effect on marginal employment. There is also some indication that regular employment was slightly reduced. Concerning welfare dependency, the minimum wage reduced the number of working welfare recipients, with some indication that about one half of them left welfare receipt due to the minimum wage.
    Keywords: minimum wages,welfare dependency,labor supply,Germany
    JEL: I38 J22 J30
    Date: 2017
  6. By: Koster, Hans R.A.; Pasidis, Ilias; van Ommeren, Jos
    Abstract: Why do shops cluster in shopping streets? According to theory, retail firms benefit from shopping externalities. We identify these externalities for the main shopping streets in the Netherlands by estimating the effect of footfall - the number of pedestrians that pass by - on store owner's rental income, which is a composite of the effects of footfall on shop rent and on vacancy rates. We address endogeneity issues by exploiting spatial variation between intersecting streets. Our estimates imply an elasticity of rental income with respect to footfall of 0.25. We find that a shop's marginal benefit of a passing pedestrian is € 0.005. It follows that subsidies to retail firms that increase with the levels of footfall generated by these shops are welfare improving. The optimal subsidy to store owners is, on average, 10 percent of the rent, but is higher for retail firms that generate high levels of footfall. Although explicit subsidies are controversial and difficult to implement, our results seem to justify current policy practices which cluster shops by pedestrianisation of shopping streets or by providing subsidised parking for shoppers.
    Keywords: agglomeration economies; footfall.; rents; retail; shopping externalities; Vacancies
    JEL: R30 R33
    Date: 2017–08
  7. By: Madaschi, Christophe; Nuevo, Irene Pablos
    Abstract: This paper looks at how the profitability of banks in Sweden and Denmark has evolved in the context of negative interest rates. Overall, it finds that profitability has continued to improve, even with negative monetary policy rates. Data and modelbased evidence confirm that the monetary policy transmission to bank lending rates has so far not been impaired, though they point to a downward stickiness in the bank deposit rate. Swedish and Danish banks rely mainly on wholesale funding to finance their activities, and the fall in wholesale funding costs has led to a significant decline in interest expenses, thereby bolstering the resilience of the net interest income margin. All in all, this has created the prerequisites for positive credit supply developments, and possible unintended consequences of negative monetary policy rates, such as a reduction in credit supply, have not materialised. However, according to Sveriges Riksbank and Danmarks Nationalbank, the prevailing low level of interest rates has aggravated financial stability risks stemming from the large exposure of the banking sector to the housing market in both economies, in a context of rapidly rising housing prices and the resultant growing indebtedness of the household sector. JEL Classification: E58
    Keywords: banks’ profitability, monetary policy pass-through
    Date: 2017–08
  8. By: Capriati, Michele; Divella, Marialuisa
    Abstract: By using firm-level data provided by the fourth round of the (Italian) Community Innovation Survey (CIS 2012), this paper explores whether the implementation of specific changes in work organisation within a firm influences its innovation performance, not only directly, but also via reinforcing the link between human capital resources and innovation. The authors also analyse the overall effect of human capital and work organisation, which enables them to identify which combination of these variables leads to the highest level of firms’ technological capabilities. Main findings confirm that not only the acquisition of new skills through the hiring of qualified personnel, but also how personnel management affects individual employees on the work floor should be considered to the development of firms’ innovation capacity: indeed, work organisation as well as strong positive complementarities or synergy effects between human capital and work organisation have been found to give firms a clear competitive advantage vis à vis both non­innovating firms and firms unable to internally generate new products and processes (i.e. entirely or at least partly by themselves). These positive effects are present and relevant in both manufacturing and service firms, whilst a more differentiated impact has emerged between firms in high-tech and low-tech sectors of the economy. On the whole, the contribution raises some relevant issues about the Italian lack of innovation in work organisation, which requires particular attention by the human resources management of firms and the industrial policy of governments.
    Keywords: work organisation,human capital,technological capabilities,innovation generation,firms,industries
    JEL: O30 O31 O32
    Date: 2017
  9. By: Brutscher, Philipp-Bastian; Heipertz, Jonas; Hols, Christopher
    Abstract: This paper uses a unique experiment conducted as part of the Investment Survey of the European Investment Bank (EIB) to provide novel evidence on firms' preferences over loan characteristics and the relation between terms of credit and investment decisions. The design of the experiment allows revealing firm's financing preferences and willingness-to-pay in a clean and straightforward manner. The results show that firms are especially sensitive to the loan amount, the collateral requirement and the interest rate. Results are heterogeneous between sectors, size classes and types of projects.
    Keywords: firm preferences,investment decision,corporate finance
    JEL: D22 D24 G11 G21 G30
    Date: 2017
  10. By: Jan (J.C.) van Ours (Erasmus School of Economics; Tinbergen Institute, The Netherlands); Ali Palali (CPB)
    Abstract: Our paper investigates the effect of tobacco control policies on smoking initiation in eleven European countries. We analyze longitudinal data of individuals by using information about their age of onset of smoking. We apply hazard rate models to study smoking initiation. Thus, we are able to take into account observed and unobserved personal characteristics as well as the effect of the introduction of a variety of tobacco control policies including bans on tobacco advertisements, smoke-free air regulation, health warnings on packages of cigarettes and treatment programs to help smokers quitting. We find that none of these tobacco control policies influence smoking initiation.
    Keywords: tobacco control policies; smoking initiation; hazard rate models
    JEL: I12 C41
    Date: 2017–08–03
  11. By: Jochen Hartwig (Faculty of Economics and Business Administration, Chemnitz University of Technology, Germany); Hagen Krämer (Faculty of Management Science and Engineering, Karlsruhe University of Applied Sciences, Germany)
    Abstract: The year 2017 marks the 50th anniversary of William J. Baumol’s seminal model of ‘unbalanced growth’, which predicts the so-called ‘Growth Disease’, i.e., the tendency of aggregate productivity growth to slow down in the process of tertiarisation. In an important contribution published in 2001, however, Nicholas Oulton showed that the shift of resources to the service sector may raise rather than lower aggregate productivity growth if the service industries produce intermediate rather than final products. While Oulton’s reasoning is logically consistent, the question arises whether it is also valid from an empirical point of view. We use the 2011 release of EU KLEMS data to determine whether the shift of resources to services has raised or lowered aggregate productivity growth in the G7 countries.
    Keywords: Baumol’s Disease, productivity growth, EU KLEMS
    JEL: E24 O14 O41 O47 O57
    Date: 2017–07
  12. By: Montanari, Giorgio E.; Doretti, Marco; Bartolucci, Francesco
    Abstract: The periodic evaluation of health care services is a primary concern for many institutions. In this work, we focus on nursing home services with the aim to produce a ranking of a set of nursing homes based on their capability to improve - or at least to keep unchanged - the health status of the patients they host. As the overall health status is not directly observable, latent variable models represent a suitable approach. Moreover, given the longitudinal and multilevel structure of the available data, we rely on a multilevel latent Markov model where patients and nursing homes are the first and the second level units, respectively. The model includes individual covariates to account for the patient case-mix and the impact of nursing home membership is modeled through a pair of correlated random effects affecting the initial distribution and the transition probabilities between different levels of health status. Through the prediction of these random effects we obtain a ranking of the nursing homes. Furthermore, the proposed model is designed to address non-ignorable dropout, which typically occurs in these contexts because some elderly patients die before completing the survey. We apply our model to the Long Term Care Facilities dataset, a longitudinal dataset gathered from Regione Umbria (Italy). Our results are robust to the sensitivity parameter involved (the number of latent states) and show that differences in nursing homes' performances are statistically significant. The authors certify that they have the right to deposit this contribution in its published format with MPRA.
    Keywords: clustered data, health status evaluation, non-ingorable dropout, random effects
    JEL: C13
    Date: 2017–08–08
  13. By: Crossley, Thomas F.; Zilio, Federico
    Abstract: Each year the UK records 25,000 or more excess winter deaths, primarily among the elderly. A key policy response is the “Winter Fuel Payment†(WFP), a labelled but unconditional cash transfer to older households. The WFP has been shown to raise fuel spending among eligible households. We examine the causal effect of the WFP on health outcomes, including self-reports of chest infection, measured hypertension and biomarkers of infection and inflammation. We find a robust and statistically significant six percentage point reduction in the incidence of high levels of serum fibrinogen. Reductions in other disease markers point to health benefits, but the estimated effects are not robustly statistically significant.
    Date: 2017–08–15
  14. By: Adriaan (A.R.) Soetevent (University of Groningen, The Netherlands; Tinbergen Institute, The Netherlands); Gert-Jan Romensen (University of Groningen, The Netherlands;)
    Abstract: How to engage workers in conservation efforts when the company pays the bill? In a field experiment with 409 bus drivers, we investigate the potential of targeted peer-comparison feedback and on-the-road coaching. Drivers receive individualized reports with peer-comparison messages on multiple driving dimensions. In addition, coaches quasi randomly provide drivers with in person coaching moments on the bus. Based on 800,000 trip-level observations, we find that the targeted peer-comparison treatments do not improve driving. On-the-road coaching significantly improves driving on multiple dimensions but only temporarily. Further analysis reveals negative interaction effects between the two programs.
    Keywords: peer comparisons; coaching; worker motivation; fuel conservation
    JEL: D2 M5 Q5
    Date: 2017–08–03
  15. By: Vladisavljević, Marko; Narazani, Edlira; Golubović, Vojin
    Abstract: This paper investigates wage differences between the public and private sectors in the Western Balkan countries. As currently there are no micro data sets that are fully comparable across countries, we provide evidence based on the available macro-level data and results from recent micro-level research which typically focus on the individual countries. We find that in all Western Balkan countries the average wages in the public sector are higher than the wages in the private sector, but also that the high-skilled workers work more frequently in the public sector, therefore partially or fully "justifying" the wage differences. Around the begining of 2010s, wage differences were lower in Montenegro, Albania and Kosovo, where when adjusted for the differences in workers characteristics they become insignificant. The differences were more promenent in Serbia, Macedonia and Bosnia and Herzegovina, where the differences in characteristic cannot explain the gap fully, and where the public sector wage premium is positive and significant. However, public private wage differences are still very volatile and under the impact of countries' political decisions. The differences in the size of the premium is discussed in the context of previously estblished correlates: differences in the total public sector size and private sector job security, as well as different size of the public sector wage premium at the different parts of the wage distribution. As public private wage gaps have important micro and macro level implications, their trends and mechanisms should be closely monitored and investigated in future research.
    Keywords: Public private wage differences, Western Balkans
    JEL: J31 J45 J50
    Date: 2017–06–30
  16. By: Mazboudi, Mohamad; Hasan, Iftekhar
    Abstract: This study examines how national culture affects corporate investment. We argue that national culture affects corporate investment efficiency through the level of secrecy that national culture exhibits. Using a sample of firms from eight culturally-diverse European Union countries, we find that the level of secrecy that national culture exhibits is negatively related to corporate investment efficiency after controlling for a number of firm- and country-level factors. We also find that the negative relation between national culture and corporate investment efficiency is mitigated by an exogenous shock to the information asymmetry problem between managers and investors. Our study highlights the importance of the cultural value of secrecy/transparency as a determinant of investment efficiency at the firm-level.
    JEL: D82 G31 M41
    Date: 2017–08–08
  17. By: Wright, Joshua
    Abstract: This study seeks to estimate whether income is predictive of an individual’s risk profile. The consensus amongst the existing literature is that income is predictive of an individual’s risk profile and the two do have a relationship. This study uses a quantitative approach by estimating a series of statistical models that estimate the relationship between an individual’s income and their risk profile using a large UK based longitudinal dataset. The research finds that income is positively related to risk and that for every £1,000 increase in income, an individual’s odds of becoming risk seeking increase by 1%. Moreover, the research finds that not only is income predictive of an individual’s risk, but so too are;; gender, education level, age and self-employment.
    Keywords: Individuals, Risk Profiles, Income, UK.
    JEL: D1 D81
    Date: 2017–08–10
  18. By: Ruth Lupton; Stephanie Thomson
    Keywords: School, Social, segregation, Academies, FSM, Manchester, reforms
    JEL: I2 I3
    Date: 2017–08
  19. By: Gorecki, Paul
    Abstract: The paper argues that the sentences imposed on 31 May 2107 by the Central Criminal Court in the commercial flooring bid-rigging cartel case and the methodology used in setting those sentences seriously undermines the effective enforcement of competition law in Ireland. The sentence imposed on the individual responsible for initiating and participating for 2 years and 4 months in the bid-rigging cartel was only three weeks wages or €7,500. No gaol sentence was imposed. The undertaking was fined €10,000; the value of the rigged tenders it won totalled €556,000. The Court’s reasoning did not justify the low sanctions. Current sentencing norms indicate a custodial sentence and much higher fines for both the individual and the undertaking. This is consistent with the application of EU and US Sentencing Guidelines to the facts of the commercial flooring bid-rigging cartel case. If the sentences imposed by the Central Criminal Court are not successfully appealed as being unduly lenient and appropriate sentencing guidelines developed, then the prospect for competition law enforcement in Ireland is grim. In particular, the effectiveness of the Cartel Immunity Programme, a vital tool for cartel detection and prosecution, will be severely damaged.
    Keywords: Bid-rigging cartel; commercial flooring; Competition Act 2002; unduly lenient; sentencing competition law; cartels.
    JEL: D43 K21 K41 K42 L41
    Date: 2017–08–14

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