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on Microeconomic European Issues |
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Issue of 2010‒04‒11
sixteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Kamil Galuščák (Czech National Bank, Na Příkopě 28, 115 03 Praha 1, Czech Republic.); Mary Keeney (Central Bank and Financial Services Authority of Ireland, PO Box 559, Dame Street, Dublin 2, Ireland.); Daphne Nicolitsas (Bank of Greece, 21 E. Venizelos Avenue, GR 102 50 Athens, Greece.); Frank Smets (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Pawel Strzelecki (National Bank of Poland, ul. Świętokrzyska 11/21, 00-919 Warszawa, Poland.); Matija Vodopivec (Bank of Slovenia, Slovenska 35, 1505 Ljubljana, Slovenia.) |
| Abstract: | This paper uses information from a rich firm-level survey on wage and price-setting procedures, in around 15,000 firms in 15 European Union countries, to investigate the relative importance of internal versus external factors in the setting of wages of newly hired workers. The evidence suggests that external labour market conditions are less important than internal pay structures in determining hiring pay, with internal pay structures binding even more often when there is labour market slack. When explaining their choice firms allude to fairness considerations and the need to prevent a potential negative impact on effort. Despite the lower importance of external factors in all countries there is significant cross-country variation in this respect. Cross-country differences are found to depend on institutional factors (bargaining structures); countries in which collective agreements are more prevalent and collective agreement coverage is higher report to a greater extent internal pay structures as the main determinant of hiring pay. Within-country differences are found to depend on firm and workforce characteristics; there is a strong association between the use of external factors in hiring pay, on the one hand, and skills (positive) and tenure (negative) on the other. JEL Classification: J31, J41. |
| Keywords: | Wage rigidity, newly hired workers, internal pay structure, employee turnover, business cycle, survey data. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101153&r=eur |
| By: | Alex Bryson; Addison, J.T.,Teixeira,P.,Pahnke, A. and Bellmann, L. |
| Abstract: | Industrial relations are in flux in many nations, perhaps most notably in Germany and Britain. That said, comparatively little is known in any detail of the changing pattern of the institutions of collective bargaining and worker representation in Germany and still less in both countries about firm transitions between these institutions over time. The present paper maps changes in the importance of the key institutions, 1998-2004, and explores the correlates of two-way transitions, using successive waves of the German IAB Establishment Panel and both cross-sectional and panel components of the British Workplace Employment Relations Survey. We identify the workplace correlates of the demise of collective bargaining in Britain and the erosion of sectoral bargaining in Germany, and identify the respective roles of behavioral and compositional change. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:341&r=eur |
| By: | Oleg Badunenko; Christopher F. Baum; Dorothea Schäfer |
| Abstract: | The paper investigates whether the presence and tenure of Private Equity (PE) investment in European companies improves their performance. Previous studies documented the unambiguous merit of a buyout during the 1980s and 1990s for listed firms in the US and UK markets. This study analyzes such influences in both listed and unlisted European firms during 2002-2007. Our analysis suggests that shortterm PE investments have, on average, a detrimental effect on firm performance. The performance of a firm that has PE backing is lower than that of a firm without PE backing in the first year of PE investment. Such an effect disappears if PE investments remain in the firm for an uninterrupted six-year term |
| Keywords: | Private equity financing, corporate finance |
| JEL: | M14 G24 G34 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp990&r=eur |
| By: | Ekaterina Sprenger (Osteuropa-Institut, Regensburg (Institut for East European Studies)) |
| Abstract: | This note describes Central and Eastern European countries’ (CEECs) involvement in production and trade in Europe. After having liberalised their economies in the 1990s, CEECs have become a part of international production networks in Europe. International production/distribution networks in East Asia have been developing simultaneously. The paper compares production and trade patterns in Europe and East Asia. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:ost:memopp:43&r=eur |
| By: | de la Feria, Rita (Centre for Business Taxation, University of Oxford); Lockwood, Ben (Department of Economics, University of Warwick and CEPR Fellow) |
| Abstract: | This paper provides a legal and economic analysis of the European Commission’s recent proposals for reforming the application of VAT to financial services, with particular focus on their “third pillar”, under which firms would be allowed to opt-into taxation on exempt insurance and financial services. From a legal perspective, we show that the proposals’ “first and second pillar” would give rise to considerable interpretative and qualification problems, resulting in as much complexity and legal uncertainty as the current regime. Equally, an option to tax could potentially follow significantly different legal designs, which would give rise to discrepancies in the application of the option amongst Member States. On the economic side, we show that quite generally, when firms cannot coordinate their behaviour, they have an individual incentive to opt-in on business-to-business (B2B) transactions, but not on business-to-consumer (B2C) transactions. We also show that opting in eliminates the cost disadvantage that EU financial services firms face in competing with foreign firms for B2B sales. But, these results do not hold if firms can coordinate their behaviour. An estimate of the upper bound on the amount of tax revenue that might be lost from allowing opting-in is provided for a number of EU countries. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:927&r=eur |
| By: | Michael Schwartz; Francois Peglow; Michael Fritsch; Jutta Günther |
| Abstract: | Systemic innovation theory emphasizes that innovations are the result of an interdependent exchange process between different organizations. This is reflected in the current paradigm in European innovation policy, which aims at the support of collaborative R&D and innovation projects bringing together science and industry. Building on a large data set using project-level evidence on 406 subsidized R&D cooperation projects, the present paper provides detailed insights on the relationship between the innovative success of R&D cooperation projects and project characteristics. Patent applications and publications are used as measures for direct outcomes of R&D projects. We also differentiate between academic-industry projects and pure inter-firm projects. Main results of negative binomial regressions are that large-firm involvement is positively related to pa-tent applications, but not to publications. Conversely, university involvement has positive effects on project outcomes in terms of publications but not in terms of patent applications. In general, projects’ funding is an important predictor of innovative success of R&D cooperation projects. No significant results are found for spatial proximity among cooperation partners and for the engagement of an applied research institute. Results are discussed with respect to the design of R&D cooperation support schemes. |
| Keywords: | R&D Cooperation; Innovation; Academic-Industry-Linkages; Innovation Policy |
| JEL: | O31 O32 O38 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:7-10&r=eur |
| By: | Rafael Doménech; Angel Melguizo |
| Abstract: | In this paper we suggest a set of indicators about the future performance of the Spanish public pension system and a suitable method of representing their uncertainty, in order to improve the communication to the public opinion about its main future challenges. Spain seems a particularly interesting case in Europe to illustrate our proposals, since the social security system has been in surplus for nine consecutive years, in sharp contrast to the projections made just a decade ago, but, at the same time, most projections foresee for Spain one of the highest increases in public expenditure among EU countries due to ageing. We argue that simple, transparent, credible, public and periodic indicators, which take explicitly into account the uncertainty about future demographic, economic and institutional developments, may contribute to improve the debate on the policies needed to strengthen the pension system. |
| Keywords: | Pensions, projections, communication, uncertainty. |
| JEL: | E17 H55 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:0911&r=eur |
| By: | Schneider, Hilmar (IZA); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University) |
| Abstract: | This strategy paper by the Institute for the Study of Labor (IZA) shows ways in which Germany once more can attain full employment in the coming decade. Much of what the previous government's "Agenda 2010" has put into motion has clearly steered labor market development in the right direction. The reforms are one of the main reasons why Germany has been more resistant to the recent financial and economic crisis than other countries. While these achievements should not be called into question, further action is necessary. The IZA concept includes the following elements: (1) Education reform: Early childhood education must be improved. Social background should no longer determine future career prospects. More independence and competition between schools and universities would improve the quality of education. Selection of students into different secondary school tracks should occur at a higher age. The dual system of apprenticeship training could be shortened. College tuition fees could be replaced by a graduate tax. (2) Welfare state reform: A consistent implementation of the principle of reciprocity would create additional employment incentives and make working for a living worthwhile again even for the low-skilled. Workfare is socially just and promotes independence rather than producing dependency. Child benefits should be granted primarily as vouchers. (3) Job placement reform: The problem groups of the labor market need one-stop support tailored to their individual needs as soon as they become unemployed. IZA proposes the creation of job centers that act independently from local and federal authorities in order to avoid the organizational maze of unclear responsibilities. (4) Immigration policy reform: Germany needs high-skilled immigrants to cope with demographic change and skilled labor shortages. A selection system for permanent immigrants and a market-based solution for temporary immigrants would substantially increase the economic benefits of immigration and create additional momentum for the realization of full employment. |
| Keywords: | labor market policy, Agenda 2010, Hartz reforms, workfare, job center, education, demography, migration policy |
| JEL: | J08 J18 J21 J24 J38 J61 J68 I28 I38 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izapps:pp15&r=eur |
| By: | Antonczyk, Dirk (University of Freiburg); DeLeire, Thomas (University of Wisconsin-Madison); Fitzenberger, Bernd (University of Freiburg) |
| Abstract: | This paper compares trends in wage inequality in the U.S. and Germany using an approach developed by MaCurdy and Mroz (1995) to separate age, time, and cohort effects. Between 1979 and 2004, wage inequality increased strongly in both the U.S. and Germany but there were various country specific aspects of this increase. For the U.S., we find faster wage growth since the 1990s at the top (80% quantile) and the bottom (20% quantile) compared to the median of the wage distribution, which is evidence for polarization in the U.S. labor market. In contrast, we find little evidence for wage polarization in Germany. Moreover, we see a large role played by cohort effects in Germany, while we find only small cohort effects in the U.S. Employment trends in both countries are consistent with polarization since the 1990s. We conclude that although there is evidence in both the U.S. and Germany which is consistent with a technology-driven polarization of the labor market, the patterns of trends in wage inequality differ strongly enough that technology effects alone cannot explain the empirical findings. |
| Keywords: | wage inequality, polarization, international comparison, cohort study, quantile regression |
| JEL: | J30 J31 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4842&r=eur |
| By: | Katharina Eck (Osteuropa-Institut, Regensburg (Institut for East European Studies)) |
| Abstract: | After the breakdown of the central planning system, Central and East European countries (CEECs) took considerable effort in liberalising their economies leading to lasting changes in CEEC trade. As a result, between 1996 and 2004 almost all of these countries displayed very high growth rates of both exports and imports, exceeding OECD and Russian performance. These trade developments are described and interpreted in this note on a descriptive rather than an analytical basis. First, trade volumes by goods categories are examined to account for what kind of goods are the major trade growth drivers. In general, growth in exports and imports is mainly driven by goods used in production rather than consumer goods. Specifically for the Central and East European EU members (EU-8), export and import growth is mainly driven by capital goods and two-way trade in a special subgroup of intermediate goods, i.e., parts and accessories of capital goods. This result can be associated with increasing offshoring activities between the old EU member states and the new EU-8 countries. A closer look at EU-8 exports to and imports from Germany confirms this finding: EU-8 states tend to import parts and accessories of capital goods from Germany to produce and export parts and accessories of capital goods or final capital goods to Germany. Second, the effects of liberalisation on the variety versus the intensity of trade are described. Here as well, CEEC growth in trade at the extensive margin is driven by intermediate rather than consumer goods. Considering the import side this finding has important implications: While more consumer goods “only” have static welfare effects, a higher input variety might signal a change of the economy’s state of technology. The author is a graduate student at the Department of Economics, University of Regensburg and a research assistant at the OEI. I am grateful to Richard Frensch for many helpful discussions and guidance on this note. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ost:memopp:40&r=eur |
| By: | Jan Hanousek (CERGE-EI and CEPR); Evžen Ko?enda (CERGE-EI and CEPR); Mathilde Maurel (Centre d'Economie de la Sorbonne) |
| Abstract: | We review a large body of literature dealing with the effects of Foreign Direct Investment (FDI) on economies during their transformation from a command economic system toward a market system. We report the results of a meta-analysis based on the literature on externalities from FDI. The studies on emerging European markets covered in our survey report direct and indirect FDI effects weakening over time, similarly as in other FDI destination countries. This is imputable to a publication bias that is detected and to the fact that more sophisticated methods and more controls can be used once a sufficient time span is available. Panel studies are likely to find relatively lower spillover effects. The choice of the research design (definition of firm performance and foreign firm presence) matters. More specific to the sampled studies is the role played by forward and backward linkages, which dominate other channels in driving FDI externalities. |
| Keywords: | FDI, productivity spillovers, economic transformation, emerging markets, meta-analysis. |
| JEL: | C42 D62 F21 F23 O3 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:10024&r=eur |
| By: | Nicola D. Coniglio (University of Bari); Giuseppe Celi (University of Foggia); Cosimo Scagliusi (University of Bari) |
| Abstract: | The presence of organized crime is a pervasive feature of many developed and developing countries. Even if ‘mafia’ organizations have greatly enlarged the geographical scope of their activities, as in the past they are still deeply rooted in specific territories where their presence generates a host of influences on socio-economic performances (perverse social capital). In this paper we analyse the consequences of the presence of organized crime on the long-term accumulation of human capital, a key determinant of economic growth. To do this we build a unique dataset where - among other information - we identify municipalities where the presence of organized crime is particularly pervasive in an Italian region, Calabria, where is based one of the most powerful international criminal organization, 'Ndrangheta. Our results suggest that the presence of organized crime inhibits the accumulation of human capital both directly (reducing the incentive to invest in formal education) and indirectly by increasing migration outflows. |
| Keywords: | Organized crime, human capital, social capital, migration |
| JEL: | J61 J24 O15 O18 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0028&r=eur |
| By: | Isabelle Darmon (University of Manchester); Coralie Perez (Centre d'Economie de la Sorbonne); Sharon Wright (University of Stirling) |
| Abstract: | Labour market and career advice and guidance have received considerable recent research and policy attention and have been heralded as part of the new institutional resources required in reformed, active, welfare states. We seek to understand the meaning of such policy enthusiasm by proposing an analysis of guidance as a "governmental technology" particularly suited for new conceptions of social protection and mobilisation for work. We bring in the results of a three years comparative study of guidance services in France, Slovenia, Spain and the UK, particularly in the form of a cross-national typology. Our review of the conceptions of the user and of the governance mechanisms in place, from target related funding to "softer" staff monitoring, show how they combine to shape staff strategies and user conduct into a limited range of stereotypical attitudes, testifying to the dissemination of a norm of adaptation to the labour market. |
| Keywords: | Labour market and career guidance, activation, governmental technology, comparison, conduct. |
| JEL: | J08 J68 I38 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:10015&r=eur |
| By: | M.Deidda |
| Abstract: | The existence of capital market imperfections causes business investment decisions to be strongly dependent on households' private wealth allocation. I claim that if a link exists between private wealth and business decisions, it should be stronger in countries with less developed capital markets. Here, I test this theoretical prediction assessing the relationship between initial household net wealth and the probability of switching to entrepreneurship in Italy and the United States, using household-level data from the Survey of Household Income and Wealth (SHIW) and the Panel Survey of Income Dynamics (PSID). Although Italy and the United States are both developed countries, there are striking differences between the two in terms of transaction costs, downpayment requirements and participation in financial markets. I formulated several theoretical predictions, which are then compared with the data at hand. First of all, I argue that initial wealth should matter more for potential Italian entrepreneurs, who may encounter greater difficulties than their US counterparts in obtaining sufficient funds from a bank or financial institution to start a business. From this perspective, "informal markets" (i.e. help from friends or relatives) should play a more significant role for potential entrepreneurs in Italy, especially for those who are more likely to be constrained. Secondly, I claim that a well developed financial market, by reducing household exposure to financial risk, would positively affect transition into entrepreneurship. Therefore, I fill a gap in the literature introducing a portfolio diversification index, calculated as the inverse of the Herfindhal index, in order to assess the level of financial sophistication. Last but not least, I simultaneously estimate the probability of switching to entrepreneurship and changes in net wealth. Using a sample selection model with endogenous switching makes it possible to deal with endogeneity issues, related to the fact that households may actually accumulate assets prior to setting up a business. |
| Keywords: | entrepreneurship; business start up; financial development |
| JEL: | E21 G20 L26 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201004&r=eur |
| By: | Nicholas Oulton; Ana Rincon-Aznar |
| Abstract: | We employ the EU KLEMS database to estimate the real rate of return to capital in 14 countries (11 in the EU, three outside the EU) in 10 branches of the market economy plus the market economy as a whole. Our measure of capital is an aggregate over seven types of asset: three ICT assets and four non-ICT assets. The real rate of return in the market economy does not vary very much across countries, the extremes being Spain (high) and Italy (low). The real rate appears to be trendless in most countries. Within each country however, the rate varies widely across the 10 branches, often being implausibly high or low. We also estimate the growth of capital services by two different methods: ex-post and ex-ante, and the contribution of capital to output growth by three methods: ex-post, ex-ante and hybrid. The ex-ante method uses an estimate of the required rate of return for each country instead of the actual, average rate of return to calculate user costs and also employs the expected growth of asset prices rather than the actual growth. These estimates are derived from exactly the same data as for the ex-post method, ie without any extraneous data being employed. For estimating the contribution of capital to output growth, the ex-ante method uses ex-ante profit as the weight, while both the ex-post and the hybrid method use ex-post profit. We find that the three methods produce very similar results at the market economy level. But differences are much larger at the branch level, particularly between the ex-post and ex-ante methods. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:347&r=eur |
| By: | Anaïs Hamelin (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | This paper investigates the influence of a firm’s distance from control on its performance, using a unique firm level data set on small business ownership, as well as balance sheet information. This study fills a gap in the empirical governance literature by investigating whether or not there is an expropriation of minority shareholders in small business groups. Contrary to what is usually observed for large business groups, results show a positive relationship between the separation of control from ownership and firm performance. Results also underline that tunneling is used to promote controlling shareholders’ profit stability rather than profit maximization in small business groups. |
| Keywords: | Ownership, Control, Tunneling, Small Business, Performance. |
| JEL: | G32 G34 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2010-04&r=eur |