Inflation Dynamics in the New EU Member States: How Relevant Are External Factors?

In this paper we evaluate the relative influence of external versus domestic inflation drivers in the 12 new European Union (EU) member countries. Our empirical analysis is based on the New Keynesian Phillips Curve (NKPC) derived in Galí and Monacelli (2005 ) for small open economies (SOE). Employing the generalized method of moments (GMM), we find that the SOE NKPC is well supported in the new EU member states. We also find that the inflation process is dominated by domestic variables in the larger countries of our sample, whereas external variables are mostly relevant in the smaller countries.     

Addressing leakage in the EU ETS: Border adjustment or output-based allocation?

The EU ETS has been criticised for threatening the competitiveness of European industry and generating carbon leakage, i.e. increasing foreign greenhouse gas emissions. Two main options have been put forward to tackle these concerns: border adjustments and output-based allocation, i.e. allocation of free allowances in proportion to current production. We compare various configurations of these two options, as well as a scenario with full auctioning and no border adjustment. Against this background, we develop a model of the main sectors covered by the EU ETS: electricity, steel, cement and aluminium. We conclude that the most efficient way to tackle leakage is auctioning with border adjustment, which generally induces a negative leakage (a spillover). This holds even if the border adjustment does not include indirect emissions, if it is based on EU (rather than foreign) specific emissions, or (for some values of the parameters) if it covers only imports. Another relatively efficient policy is to combine auctioning in the electricity sector and output-based allocation in exposed industries, especially if free allowances are given both for direct and indirect emissions, i.e. those generated by the generation of the electricity consumed. Although output-based allocation is generally less effective than border adjustment to tackle leakage, it is more effective to mitigate production losses in the sectors affected by the ETS, which may ease climate policy adoption.     

Border Bargains and the “New” Sovereignty: Canada-US Border Policies from 2001 to 2005 in Perspective

From 2001 to 2005 Canada and the US dramatically altered the way each country views its border. In response to the attacks on New York City and Washington DC, Canada and the US entered into three important partnerships: the Smart Borders Agreement (SBA), the Container Security Initiative (CSI), and the Security Prosperity Partnership (SPP). These arrangements will be conceptualised here as “tacit bargains” whereby Canada provided the US with security in hope of renewed trust and economic accessibility. These “tacit bargains” required a concession of traditional state sovereignty so that stable and predictable relations between both countries could continue. While this process is ostensibly a violation of state sovereignty, the argument presented here is that these three “tacit bargains” represent a transition of “old” sovereignty to “new” sovereignty.     

Is R&D always growth-enhancing? Empirical evidence from the EU countries

This study provides empirical evidence regarding the effects of R&D on economic growth in a panel of 28 European Union (EU) countries over the period 1997–2014. In particular, we investigate whether the impact of business and government R&D stocks on economic growth depends on the country’s distance to the world technology frontier. The main findings are that in the EU (i) there is positive, statistically significant business R&D stock–economic growth nexus in countries that are relatively close to the frontier and (ii) no statistically significant relationship was found to exist between government R&D stock and economic growth. From the policy perspective, the results suggest that designing proper national policies that allow switching from investment-based to innovation-based strategies at appropriate moments may be far more important than a simple call for increase in R&D expenditures and setting common numerical targets for all EU-member states.     

Does economic freedom increase income inequality? Evidence from the EU countries

This paper examines the relationship between economic liberalization and income inequality in the EU using panel data for the 2000s. The empirical evidence suggests that economic freedom is strongly related to income inequality. However, not all areas of economic freedom affect income distribution similarly. Government size is robustly associated with inequality, and also when controlling for potential endogeneity in a dynamic panel data analysis. Regulation is linked to income inequality as well, whereas legal system and sound money have no significant effects on income distribution. In the case of freedom to trade internationally, the relationship differs between old (EU-15) and new (former socialist) EU countries.     

Is productivity diverging in the EU? Evidence from 11 Member States

An argument that received a lot of attention in the political and economic discussion surrounding the recent crisis in the EU is that diverging trends in productivity across member countries will undermine the viability of the common currency. This article examines the issue of convergence in multifactor productivity using sector-level data from 11 EU Member States. A state-space model is developed, and formal Bayesian model comparisons are performed to infer whether productivity is diverging, both at the aggregate level and at a sector-by-sector basis. The data point toward diverging productivity at the aggregate level, but suggest the opposite for many individual sectors.     

Is growth corrupted or bureaucratic? Panel evidence from the enlarged EU

This article aims at analysing the issue of conditional convergence in the new enlarged European Union (EU) over the period 1995–2012 by means of panel data techniques. We examined the issue of conditional convergence in the enlarged EU giving particular attention to the effects of corruption and bureaucracy on growth controlling for a widely used set of explanatory variables such as investment (domestic and foreign), human capital formation, inflation, general government final consumption and trade openness. Furthermore, we examine if growth responds differently to corruption and bureaucracy in the new EU members by means of two group-specific interaction variables to capture possible different responses to corruption and bureaucracy. The analysis reveals evidence of conditional convergence in the enlarged EU, with investment share, foreign direct investment, human capital, and country openness appearing as robust growth drivers. In contrast, inflation and government consumption rather hamper growth. Furthermore, the effects of corruption and bureaucracy on growth seem to differ across old and new EU members.     

Do Balkan economies catch up with EU? New evidence from panel unit root analysis

This paper explores empirically the issue of income convergence for the Balkans over the period 1994–2011 and the investigation relies on income differentials from both the averages of the European Union’s-15 (EU-15) and the European Union’s-24 (EU-24) as well as within the Balkan group. The adopted methodology deploys the non stationary panel unit root framework to cope with the problem of limited sample providing more reliable insight and, in particular, the analysis uses the univariate and panel minimum Lagrange Multiplier (LM) unit root tests, suggested by Lee and Strazicich (2003, 2004) and Im et al. (2005), that accounts for one and two endogenously determined structural breaks. The overall evidence is in favor of catching up with the EU benchmark cases as well as in favor of convergence within the Balkan area. However, disparities for some countries are confirmed.     

Non-commercial goals and financial performance of state-owned enterprises – some evidence from the electricity sector in the EU countries

This study considers the financial performance of state-owned enterprises (SOEs) in relation to non-commercial goals. We focus on enterprises operating in the production of electricity sector in the EU countries and analyse their profitability conditioning on the level of electricity prices. We reveal that SOEs underperform as compared to their privately owned counterparts when they operate in those markets that have lower prices. This suggests that their profitability is likely to be substantially affected by pursuing goals other than profit-maximisation - providing crucial products and services at affordable prices - and emphasises a need to consider the non-commercial objectives of SOEs in the empirical research.     

EU Widening and Deepening – Are these goals reconcilable?

The paper examines the compatibility between widening the EU and deepening its integration endeavors, with special emphasis on eastward enlargement. After clarifying the broad nature of the accession negotiations under way, it sketches the most critical obstacles encountered in forging ahead with EU deepening, the problems posed by the ongoing restructuring of the accession candidates, and how deepening and widening necessarily interact. Before concluding with an aside on the relationship between the accession process and the EU's designs on assisting southeastern Europe, the paper briefly reviews where the negotiations stand in mid-2001 and elaborates on what may be in store for the enlargement process in the near term.The opinions expressed here are mine and do not necessarily reflect my employer's.     

New evidence on the sources of EU countries’ productivity growth—industry growth differences from R&D and competition

Recent studies on productivity growth show how competition affects innovation and TFP growth in OECD countries, but do not explicitly account for sectoral parameter heterogeneity. This paper examines whether competition and innovation have a direct effect on labor productivity growth in EU goods-producing industries separated by three different industry types. The results show that the effect of R&D on labor productivity growth is not equal across industries, but rather depends on the innovation activities of sectors. The same is true for competition and labor productivity growth. The empirical evidence indicates that in unleveled industries (i.e. industries characterized by technologically unequal firms) like Specialized Goods Suppliers and Science-Based Innovators strong labor productivity growth originates with decreased competition and increased R&D, thereby supporting Schumpeterian arguments. The findings suggest Schumpeterian effects in Supplier-Dominated Goods-Producing Industries, but reveal decreasing labor productivity growth in these sectors when competition is strongly restricted.     

Does the educational management model matter? New evidence from a quasiexperimental approach

A growing literature has appeared in the last 2 decades with the aim to explore if the way in which publicly funded private schools are managed (a ver     

Job creation and job types – New evidence from Danish entrepreneurs

We extend earlier analyses of the job creation of start-ups versus established firms by considering the educational content of the jobs created and destroyed. We define education-specific measures of job creation and job destruction at the firm level, and we use these measures to construct a measure of “surplus job creation”, defined as jobs created on top of any simultaneous destruction of similar jobs in incumbent firms in the same region and industry. Using Danish employer-employee data from 2002–2007 that identify the start-ups and that cover almost the entire private sector, these measures allow us to provide a more nuanced assessment of the role of entrepreneurial firms in the job-creation process than in previous studies. Our findings show that although start-ups are responsible for the entire overall net job creation, incumbents account for more than one-third of net job creation within high-skilled jobs. Moreover, start-ups “only” create approximately half of the surplus jobs and even less of the high-skilled surplus jobs. Finally, our approach allows us to characterise and identify differences across industries, educational groups and regions.     

Is the EU ETS a Just Climate Policy?

The European Union Emissions Trading System (EU ETS) is in dire straits. Prone to design problems and suffering from the effects of the economic crises the scheme is criticised for its poor achievements. In this paper we will analyse some of the features of this situation from an ethical perspective. The major part is dedicated to the complications within each phase of the EU ETS and to the recent developments it has undergone. We will briefly discuss the remedies suggested by prominent commentators. Furthermore, any policy tool to tackle climate change should be evaluated in view of the profound equity issues that are inherent to the climate problem. We will evaluate the EU ETS according to two justice-based criteria, related to effectiveness and the distribution of the duties involved in climate change, respectively. We will conclude that the EU ETS, in its current form, clearly lacks fairness on both criteria. However, the biggest problem is the unwillingness of EU leaders to mend, what could be, a commendable climate policy tool. To that extent, we argue, those leaders are acting unjustly.     

Turning the page? EU fiscal consolidation in the wake of the crisis

The fiscal cost of the financial and economic crisis in Europe is huge. The paper provides provisional estimates of this cost and looks at its implications for the sustainability of public finances, taking into account also the impact of aging populations. The historical experience suggests that economic growth is persistently lowered in the aftermath of financial crisis, making fiscal consolidation more difficult yet all the more essential. Meanwhile the timing of the exit from fiscal stimulus and subsequent fiscal consolidation must reconcile sustainability and stabilisation goals—a delicate balancing act. The paper will argue in favour of structural reform to boost the economic growth potential alongside fiscal consolidation. The fiscal coordination framework in the EU, together with the Europe 2020 strategy, is seen to underpin this approach.     

Have the euro area and EU governance worked? Just the facts

We test whether the two key EU and euro area economic governance pillars, the Stability and Growth Pact and the Lisbon Strategy, have had any impact on macroeconomic outcomes. We test this proposition on a panel of 27, some of which are non-EU (control group) using a programme evaluation approach. The impact of the EU economic governance pillars is evaluated based on both the performance before and after their application as well as against the control group. We find strong and robust evidence that neither the Stability and Growth Pact nor the Lisbon Strategy have had a significant beneficial impact on fiscal and economic performance outcomes. We conclude that a profound reform of these pillars is needed to make them work in the next decade.     

Is the Hybrid New Keynesian Phillips Curve Stable? Evidence from Some Emerging Economies

This paper primarily examines whether the ‘hybrid new Keynesian Phillips curve’ (HNKPC) holds for four important emerging economics viz., Brazil, Russia, India and South Africa. This has been done after testing for the structural stability of this relationship. Econometric issues like the test of unit roots in presence of a structural break and estimation of output gap have also been done appropriately. Our findings suggest that the HNKPC is not stable for all the four countries. However, the analysis based on the two sub-periods thus formed clearly shows mixed evidence in respect of holding of this relationship.

     

What causes the IPO underpricing? New evidence from China’s SME market

ABSTRACT

We study 10-year IPO initial returns in China’s small and medium-sized enterprise (SME) board between 2006 and 2016, including 755 IPO samples. At the same time, we test how policy changes of IPO pricing and trading mechanism affect first-day initial returns. Our article adopts the stochastic frontier approach to estimate the fair value of IPOs and decompose the components of deliberate underpricing and mis-valuation factors, then using linear regressions investigate correlation between first-day initial returns and deliberate underpricing or mis-valuation factors. We find it is mis-valuation factors, especially, the irrational behaviour of individual investors that mainly cause the IPO underpricing in China’s SME market rather than deliberate underpricing. Besides, influenced by IPO pricing policies, the characteristic of IPO pricing varies from period to period.     

Do food standards affect the quality of EU imports?

This paper investigates the relationship between the diffusion of EU standards and product quality upgrading using highly disaggregated import data to the EU in the food industry. Results show that, on average, the diffusion of EU voluntary standards boosts the rate of quality upgrading. However, the results are heterogeneous when moving from primary to processed foods, and from ISO to non-ISO standards.