nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2021‒10‒25
sixteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. The drivers of SME innovation in the regions of the EU By Hervás-oliver, José-luis; Parrilli, Mario Davide; Rodríguez-pose, Andrés; Sempere-ripoll, Francisca
  3. Is Transparency a Free Lunch? Evidence from the Italian Local Health Authorities By Ferrara, Paolo Lorenzo; Guccio, Calogero; Scaglioni, Carla
  4. The extension of late working life in Germany: trends, inequalities, and the East-West divide By Christian Dudel; Elke Loichinger; Sebastian Klüsener; Harun Sulak; Mikko Myrskylä
  5. Income Comparison and Happiness within Households By Salland, Jan
  6. Corporate CO2 offsetting in small- and medium-sized firms in Germany By Daniel Engler; Gunnar Gutsche; Amantia Simixhiu; Andreas Ziegler
  7. Regional Productivity Slowdown, Tax Havens and MNEs’ Intangibles: where is Measured Value Creation? By Jean-Charles Bricongne; Samuel Delpeuch; Margarita Lopez Forero
  8. Support from grandparents and mothers’ depression around the time of separation By Niina Metsä-Simola; Anna Baranowska-Rataj; Hanna Remes; Mine Kühn; Pekka Martikainen
  9. Income-related inequality in smoking habits: A comparative assessment in the European Union By Paolo Liberati; Giovanni Carnazza; Giuliano Resce
  10. The long-term effects of experienced macroeconomic shocks on wealth By Viola Angelini; Irene Ferrari
  11. Effects of business improvement districts on firm performance, place attractiveness, and urban safety By Daunfeldt, Sven-Olov; Mihaescu, Oana; Rudholm, Niklas
  12. The Legacy of Covid-19 in Education By Katharina Werner; Ludger Woessmann
  13. Living Wages in Portugal: in search of dignity in a highly polarized labour market By José António Pereirinha; Elvira Pereira
  14. Gene‐Environment Effects on Female Fertility By Barban, Nicola; De Cao, Elisabetta; Francesconi, Marco
  15. The Geography of Job Creation and Job Destruction By Moritz Kuhn; Iourii Manovskii; Xincheng Qiu
  16. Port-city linkages and multi-level hinterlands: the case of France By Mounir Amdaoud; César Ducruet; Marc-Antoine Faure

  1. By: Hervás-oliver, José-luis; Parrilli, Mario Davide; Rodríguez-pose, Andrés; Sempere-ripoll, Francisca
    Abstract: European Union (EU) innovation policies have for long remained mostly research driven. The fundamental goal has been to achieve a rate of R&D investment of 3% of GDP. Small and medium-sized enterprise (SME) innovation, however, relies on a variety of internal sources —both R&D and non-R&D based— and external drivers, such as collaboration with other firms and research centres, and is profoundly influence by location and context. Given this multiplicity of innovation activities, this study argues that innovation policies fundamentally based on a place-blind increase of R&D investment may not deliver the best outcomes in regions where the capacity of SMEs is to benefit from R&D is limited. We posit that collaboration and regional specificities can play a greater role in determining SME innovation, beyond just R&D activities. Using data from the Regional Innovation Scoreboard (RIS), covering 220 regions across 22 European countries, we find that regions in Europe differ significantly in terms of SME innovation depending on their location. SMEs in more innovative regions benefit to a far greater extent from a combination of internal R&D, external collaboration of all sorts, and non-R&D inputs. SMEs in less innovative regions rely fundamentally on external sources and, particularly, on collaboration with other firms. Greater investment in public R&D does not always lead to improvements in regional SME innovation, regardless of context. Collaboration is a central innovation activity that can complement R&D, showing an even stronger effect on SME innovation than R&D. Hence, a more collaboration-based and place-sensitive policy is required to maximise SME innovation across the variety of European regional contexts.
    Keywords: regional innovation; SMEs; R&D; place-based; collaboration; EU regions
    JEL: O31 O32 L11
    Date: 2021–11–01
  2. By: Leonardo Becchetti (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata); Sara Mancini (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata); Nazaria Solferino (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria)
    Abstract: We investigate the effects of domestic and EU incentives on different types of corporate investments in ecological transition on a large representative sample of Italian firms including the universe of companies above 250 employees. We perform propensity score matching tests exploiting revealed information of firms that declare to use the incentives for specific ecological transition investments compared to a synthetic counterfactual of “twin” companies matched on selected characteristics. Our findings show that domestic and EU incentives significantly increase green investments, and more so if we consider investment in energy saving plants and for greenhouse emissions reduction.
    Keywords: EU incentives, green investment, propensity score
    JEL: H23 H25 Q58
    Date: 2021–10
  3. By: Ferrara, Paolo Lorenzo; Guccio, Calogero; Scaglioni, Carla
    Abstract: The healthcare sector is often considered one of the most prone to corruption and transparency policies have been proposed in several countries to fight bribery and corruption. Indeed, the transparency of public bodies potentially play a relevant role in preventing misbehaviours and favouring accountability. The paper contributes to the broader understanding of the transparency role in the healthcare sector using Italy as a case study. For this purpose we first build a composite indicator of transparency, already proposed in the literature in the field, to assess the differences in transparency and integrity between Italian Local Health Authorities (LHAs). Then we use multivariate regression to explore the relationship between the performance for different expenditure functions at LHAs level and transparency index. Our results show a wide difference in transparency and integrity among LHAs that does not always follow the classic north-south divide in the country. In addition, we find results consistent with the idea that transparency is generally associated with better performance of the LHAs in containment total health expenditure while imposing larger administrative burdens.
    Keywords: Transparency,Administrative burdens,Accountability,Local Health Authorities,Italian NHS
    JEL: C92 H30 H41
    Date: 2021
  4. By: Christian Dudel (Max Planck Institute for Demographic Research, Rostock, Germany); Elke Loichinger (Max Planck Institute for Demographic Research, Rostock, Germany); Sebastian Klüsener (Max Planck Institute for Demographic Research, Rostock, Germany); Harun Sulak; Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The extension of late working life has been proposed as a potential remedy for the challenges of aging societies. For Germany, surprisingly little is known about trends and social inequalities in the length of late working life. Here, we use data from the German Microcensus to estimate working life expectancy from age 55 onwards for the 1941-1955 birth cohorts. We adjust our calculations of working life expectancy for working hours, and present results for western and eastern Germany by gender, education, and occupation. While working life expectancy has increased across cohorts, we find strong regional and socioeconomic disparities. Decomposition analyses show that among males, socioeconomic differences are predominantly driven by variation in employment rates; whereas among women, variation in working hours is also highly relevant. Older eastern German women have longer working lives than older western German women, which is likely attributable to the GDR legacy of high female employment.
    JEL: J1 Z0
    Date: 2021
  5. By: Salland, Jan (Helmut Schmidt University, Hamburg)
    Abstract: This paper applies the German Socio-Economic Panel to analyse the effect of within household income comparison on individual life satisfaction. Our estimates indicate, a primary breadwinner wife decreases spousal individual happiness by roughly nine per cent. To state the economic significance, a €70,000 increase in external, peer reference income corresponds to a similar individual happiness decrease. The estimates suggest envy effects among couples and provide mixed evidence for gender roles to influence subjective well-being. Based on subsample estimations, our results are driven by younger birth year quartiles, lower education and total income households, East German couples and households with greater fulltime employment share. The paper adds to within household interdependence of subjective well-being and indicates negative consequences of couple income comparison for individual happiness. Wives (barely) outearning their husbands seem to signal ’competition’.
    Keywords: Life Satisfaction; Well-being; Happiness; Income Comparison; Gender Identity
    JEL: D10 I31 J16
    Date: 2021–10–05
  6. By: Daniel Engler (University of Kassel); Gunnar Gutsche (University of Kassel); Amantia Simixhiu (University of Kassel); Andreas Ziegler (University of Kassel)
    Abstract: Voluntary CO2 offsetting by individuals, firms, and organizations is increasingly considered as a direction of climate policy that is complementary to traditional approaches such as subsidies or CO2 taxes. Based on data from a large-scale survey among corporate decision makers, this paper empirically examines corporate CO2 offsetting and its determinants in small- and medium-sized firms in Germany. Our descriptive analysis shows both a rather limited engagement in corporate CO2 offsetting as well as a strong lack of knowledge about its mechanism. The econometric analysis reveals that some firm-specific characteristics like the average age of the employees, firm size, and firm age matter for CO2 offsetting. However, the main estimation results refer to the relevance of general environment-related variables like the implementation of environmental product and service innovations or the share of employees that carry out environment-related tasks and especially of climate-related factors and activities. In particular, the implementation of climate targets and the participation in the EU Emissions Trading System (EU ETS) are strongly significantly positively correlated with CO2 offsetting. In line with similar findings at the individual level, these estimation results imply that corporate CO2 offsetting also does not substitute or crowd out other climate protection and further pro-environmental activities, but rather complements them.
    Keywords: Corporate CO2 offsetting, corporate climate protection and pro-environmental activities, small- and medium-sized firms
    Date: 2021
  7. By: Jean-Charles Bricongne; Samuel Delpeuch; Margarita Lopez Forero
    Abstract: Based on French firm-level data over around 15 years we evaluate the contribution of the micro-level profit shifting –through tax haven foreign direct investments to the aggregate productivity slowdown measured in France. We show that firm measured productivity in France declines over the immediate years following the establishment in a tax haven, with an average estimated drop by 3.5% in labor apparent productivity. We argue that this productivity decline, following a presence in a tax haven, is most likely explained by multinationals’ tax optimization, where domestic productivity is underestimated as profits are not recorded anymore in the home country. The fall in productivity is especially strong for firms that are intensive in intangible capital and is equivalent to 4.1% (versus 2.7% for low intangible intensive firms), reflecting the fact that these types of assets are more easily shifted across countries and facilitate tax planning. Our results additionally suggest that the mismeasurement has strong dynamic effects, as the decline becomes more important the longer the firm remains in a tax haven. Finally, given these firms’ weight in the economy, our results imply an 8% loss at the aggregate in terms of the level of the labor productivity throughout the whole sample period, which is equivalent to an annual loss of 9.7% in terms of the aggregate annual labor productivity growth.
    Keywords: Tax Havens, Profit shifting FDI, Productivity slowdown, Productivity mismeasurement, Intangible capital
    JEL: D33 F23 H26 H87 O47
    Date: 2021
  8. By: Niina Metsä-Simola; Anna Baranowska-Rataj; Hanna Remes; Mine Kühn (Max Planck Institute for Demographic Research, Rostock, Germany); Pekka Martikainen (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Objective. This study examined mothers’ depression trajectories around the time of separation by potential availability of support from their youngest child’s grandparents. Background. Separation and single motherhood are both associated with an increased risk of depression. Grandparents are often the most important source of support to families with children, and their support may moderate separating mothers’ depression trajectories. Method. Using longitudinal Finnish register data on 118,006 separating mothers whose youngest child was age 12 or less, we examined the mothers’ depression trajectories, based on antidepressant use 4 years before and 4 years after separation. The trajectories were examined by grandparental characteristics – age, employment, health, geographical distance to the mother, and union stability – using logistic panel regression. Results. Grandparent’s availability for providing support, as proxied by younger age, employment, and lack of severe health problems all predicted a lower probability of maternal depression both before and after separation. The level of depression was also lower if grandparents lived close to the mother, and if the maternal grandparents’ union was intact. Overall, the maternal grandmothers appeared to matter the most. Conclusion. The availability of support from grandparents may partially compensate for the resource losses related to separation, and it is associated with lower maternal depression both before and after separation. Keywords. Separation, depression, mothers, grandparents, social support
    Keywords: Finland
    JEL: J1 Z0
    Date: 2021
  9. By: Paolo Liberati; Giovanni Carnazza (Università di Roma Tre); Giuliano Resce (Università del Molise)
    Abstract: This paper investigates the association between income and the habit of smoking in 30 European countries. Using the European Health Interview Survey carried out between 2013 and 2015, the analysis focuses on the relationship among net monthly equivalised income of the household, the type of smoking behaviour, and the daily average number of cigarettes smoked. Income-related inequalities are estimated using the Erreygers Index. Results show that smoking is a habit which is mainly rooted in the lowest part of the income distribution both at individual and country level, regardless of the average level of per capita income. Considering that tobacco use worsens poverty conditions by diverting household spending from basic needs to tobacco itself, our results give support to a tax increase in order to discourage its use and to the implementation of educational and prevention programs aimed at helping people to quit smoking.
    Keywords: Risky behaviours, Smoking, Income-related health inequalities, European Union
    JEL: I12 I14 O52
    Date: 2021–10
  10. By: Viola Angelini (University of Groningen; NETSPAR); Irene Ferrari (Department of Economics, University Of Venice CÃ Foscari; NETSPAR)
    Abstract: This paper examines the long-term effects of experienced macro-economic shocks – defined as multi-year peak-to-trough GDP declines of at least 10 percent – on the wealth distribution, portfolio allocation, and risk attitudes of older individuals in Europe. We show that individuals who have experienced more economic depression episodes have lower wealth in absolute terms, a lower probability to invest in risky assets, and display higher risk aversion. When analysing early investment decisions, we find that individuals hit by a depression substitute risky investments with investment in housing, and that these early choices shape wealth in the long-term.
    Keywords: Wealth distribution, economic depressions, risk aversion, early investments
    JEL: D31 E21 G51
    Date: 2021
  11. By: Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Mihaescu, Oana (Institute of Retail Economics (Handelns Forskningsinstitut)); Rudholm, Niklas (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: : Business improvement districts (BIDs) have emerged as possible solutions for the revitalization of urban areas characterized by economic decline. Using a difference-in differences model, we investigate the effects of a voluntary Swedish BID programme in five cities on firm performance, urban safety, and place attractiveness – both within and outside the BID. We find that the BID programme increased labour productivity for incumbent firms within the BID by 7.62%, mainly through an increase in revenues. However, the positive effect of the BID programme on firm performance is largely transitory, decreasing sharply during the third year and then becoming insignificant. We find no statistically significant impacts on firm performance outside the geographical boundaries of the BIDs. The results also suggest that fewer crimes were committed in the BIDs, as the estimates for all years are negative, though they are significant only for the fourth year after BID implementation. Finally, we detect no statistically significant effects of the BID programme on property values either within or outside the designated BIDs.
    Keywords: : Business improvement district; public–private partnerships; firm performance; labour productivity; property values; crime; difference-in-differences
    JEL: H44 L11 L25 R11 R12
    Date: 2021–10–15
  12. By: Katharina Werner; Ludger Woessmann
    Abstract: If school closures and social-distancing experiences during the Covid-19 pandemic impeded children’s skill development, they may leave a lasting legacy in human capital. To understand the pandemic’s effects on school children, this paper combines a review of the emerging international literature with new evidence from German longitudinal time-use surveys. Based on the conceptual framework of an education production function, we cover evidence on child, parent, and school inputs and students’ cognitive and socio-emotional development. The German panel evidence shows that children’s learning time decreased severely during the first school closures, particularly for low-achieving students, and increased only slightly one year later. In a value-added model, learning time increases with daily online class instruction, but not with other school activities. The review shows substantial losses in cognitive skills on achievement tests, particularly for students from disadvantaged backgrounds. Socio-emotional wellbeing also declined in the short run. Structural models and reduced-form projections suggest that unless remediated, the school closures will persistently reduce skill development, lifetime income, and economic growth and increase inequality.
    Keywords: Covid-19, school closures, education, schools, students, educational inequality
    JEL: I20 H52 J24
    Date: 2021
  13. By: José António Pereirinha; Elvira Pereira
    Abstract: Living Wage (LW) is a concept that goes beyond that of National Minimum Wage (NMW), since it implies income adequacy to the wage earners and to his/her family members. The implementation of LW in Portugal then implies a mix of variables, including the minimum wage (that imply labour costs, and a change of earnings distribution), but also variables that imply fiscal costs (social benefits and tax deductions). It is then expected to reach household income adequacy, and to be feasible regarding the labour and fiscal costs, and socially acceptable regarding the change of earnings distribution. The relevance of such trade-offs is of high relevance for the Portuguese economy where average and median wages are low, the NMW is generous, when related to the median wage, and wage income distribution has high inequality, namely at the top, evidencing high polarization. This article analyses such issues centred on the worker (as a wage earner, as a household member and as a citizen with social rights and fiscal duties) and using EU-SILC data to quantify some of these trade-offs by the simulation of different values for core action variables aiming to reach LW, supported on an adequate normative estimation of a Minimum Income Standard (MIS) for Portugal.
    Keywords: Living Wage (LW), National Minimum Wage (NMW), Minimum Income Standard (MIS), adequacy, feasibility, acceptability. JEL classification: D60, I30, J30
    Date: 2021
  14. By: Barban, Nicola; De Cao, Elisabetta; Francesconi, Marco
    Abstract: Fertility has a strong biological component generally ignored by economists. Using the UK Biobank, we analyze the extent to which genes, proxied by polygenic scores, and the environment, proxied by early exposure to the contraceptive pill diffusion, affect age at first sexual intercourse, age at first birth, completed family size, and childlessness. Both genes and environment exert substantial influences on all outcomes. The anticipation of sexual debut and the postponement of motherhood led by the diffusion of the pill are magnified by gene‐environment interactions, while the decline in family size and the rise in childlessness associated with female emancipation are attenuated by gene‐environment effects. The nature‐nurture interplay becomes stronger in more egalitarian environments that empower women, allowing genes to express themselves more fully. These conclusions are confirmed by heterogeneous effects across the distributions of genetic susceptibilities and exposure to environmental risks, sister fixed effects models, mother‐daughter comparisons, and counterfactual simulations.
    Keywords: Fertility, Genetics, Polygenic Score, Contraceptive Pill, Nature versus Nurture, Social Norms
    Date: 2021–10–18
  15. By: Moritz Kuhn (University of Bonn, Department of Economics); Iourii Manovskii (University of Pennsylvania, Department of Economics); Xincheng Qiu (University of Pennsylvania, Department of Economics)
    Abstract: Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities in spatial differences in unemployment, vacancies, job finding, and job filling within each country. This robust set of facts guides and disciplines the development of a theory of local labor market performance. We find that a spatial version of a Diamond-Mortensen-Pissarides model with endogenous separations and on-the-job search quantitatively accounts for all the documented empirical regularities. The model also quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle.
    Keywords: Local Labor Markets, Unemployment, Vacancies, Search and Matching
    JEL: J63 J64 E24 E32 R13
    Date: 2021–10
  16. By: Mounir Amdaoud; César Ducruet; Marc-Antoine Faure
    Abstract: The objective of this research is to examine the similarities between port traffic structure and economic structure of French port cities. Such an exercise is challenged by the core-periphery pattern of the French economy favouring transhipment. Based on the combination of Automated Identification System (AIS) data and employment data, it performs complementary analyses of the mutual specialization between ports and cities. Main results show that while larger cities handle more diversified traffic, the cross-specialization is blurred by the complexity of trade networks and supply chains. We then propose a novel methodology whereby the spatial unit of analysis is enlarged according to the type and volume of port traffic, thus considerably improving the statistical significance and economic meaningfulness of the observed linkages.
    Keywords: AIS; hinterland; maritime transport; port city; specialization; supply chain
    JEL: O18 L90 R40 R12
    Date: 2021

This nep-eur issue is ©2021 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.