Economic integration, wage policies, and social policies

This paper sets up a two country monopolistic competition modelwith intra-industry trade to study the effects of an exogenousdifferential in wage and social policies on the location ofindustry. Two model scenarios are considered. In the traditionalone with physical capital, such a differential induces a relocationeffect which increases with the level of trade integration.The ‘new economic geography’ world assumes mobileentrepreneurs which can relocate thus bringing agglomerationforces into play. The most significant difference between thisworld and the traditional one is that, at high levels of tradeintegration, where one country has emerged as the core and theother as the periphery, the core may have more generous socialpolicies and higher wages than the periphery without inducinga relocation of firms. The scope to have higher wage is constrained,however, and related to the level of trade integration in abell-shaped way.     

Ecological Dumping under Monopolistic Competition

The competitive choice of emission taxes by two governments is analysed in a model of monopolostic competition with capital mobility where pollution externalities are regional. Assuming that governments have no other policy instrument apart from emission taxes at their disposal, I show that governments choose inefficiently low (high) taxes if the importance of emissions in production is small (large) relative to transport costs and the mark-up. In contrast to the previous literature, the marginal disutility of pollution is not among the parameters which separate the non-cooperative choice of emission taxes from the social planner's choice.
JEL classification : F 1; H 7; Q 2     

Which Are The Main Drivers Behind Residential Electricity Prices?

Over the last decade the residential electricity price in most EU Member States has been increasing. Even after the introduction of significant reforms such as the liberalisation of the electricity market. This upward trend is in response to the development of different price components along the electricity supply chain. In order to identify and analyse these components for EU-Member States, a more detailed price apportionment than those offered by public sources like Eurostat and IEA is necessary. The methodology proposed in this study analyses the development of the residential electricity price and its main components between 2002 and 2012 for Germany, France, Italy and the United Kingdom. The main drivers of the price trends observed for these four countries are subsequently identified, quantified and compared. Furthermore, the residential expenditure on electricity in each country is examined in connection with the evolution of residential electricity consumption. The results show how and to what extent the residential electricity price for the selected EU Member States depends on price components such as the electricity wholesale price, the gross margin, network expenditures, energy taxes and other levies related to the decarbonisation of the national energy system. Furthermore, this detailed analysis of residential electricity prices throughout the last decade provides a sufficient data basis to draw some prospective conclusions in terms of a short-term price outlook.