Current publications

Cover of EconPol opinion

Assessing the Cost of Uncertainty Created by Brexit

Fabien Tripier (EconPol Europe, CEPII, Université Paris-Saclay)

The uncertainty surrounding Brexit is costing the UK economy £16 billion per year, according to calculations from EconPol researcher Fabien Tripier (Professor of Economics at the Université Paris-Saclay and scientific advisor at the CEPII). The cost is based on the level of political uncertainty, the effect of that uncertainty on the economy, and the comparative trajectory in the absence of uncertainty.

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Cover of EconPol Working Paper 36

Ring-fencing Digital Corporations: Investor Reaction to the European Commission’s Digital Tax Proposals

Daniel Klein (University of Mannheim), Christopher A. Ludwig (EconPol Europe, ZEW Mannheim, University of Mannheim), Christoph Spengel (EconPol Europe, University of Mannheim, ZEW Mannheim)

In this working paper, Daniel Klein (University of Mannheim), Christopher A. Ludwig (EconPol Europe, ZEW Mannheim, University of Mannheim) and Christoph Spengel (EconPol Europe, University of Mannheim, ZEW Mannheim) study the effect of digital tax measures on firm value and find that expectations about ring-fencing digital tax measures impact firm values. An analysis of investor reaction to the European Commission’s proposals on the taxation of digital corporations reveals a significant abnormal capital market reaction of -0.692 percentage points. The investor reaction is more pronounced for firms that engage more actively in tax avoidance, have a higher profit shifting potential, and for those with higher exposure to the EU. The market value of digital and innovative corporations decreased by at least 52 billion euro in excess of the regular market movement during the event window. 

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Cover of EconPol Working Paper 35

The Political Economy of Multilateral Lending to European Regions

Zareh Asatryan (EconPol Europe, ZEW Mannheim), Annika Havlik (EconPol Europe, ZEW Mannheim, University of Mannheim)

European regions which have representatives on the board of directors at the European Investment Bank (EIB), the world’s largest multilateral lending and borrowing institution, are more likely to receive loans than those regions in Europe which aren’t represented. Researchers Zareh Asatryan (EconPol Europe, ZEW Mannheim) and Annika Havlik (EconPol Europe, ZEW Mannheim, University of Mannheim) collected information on the regions of origin of around 500 national representatives at the EIB’s Board of Directors (the decisive body for loan approvals) since its foundation in 1959. They found that a representative's appointment increases the probability of their sub-national region receiving a loan by 17 percentage points. This “home-bias" effect is particularly present in large loans financing infrastructure projects.

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Cover of EconPol Working Paper 34

The Social Costs of Side Trading

Andrea Attar, Thomas Mariotti, François Salanié (EconPol Europe; Toulouse School of Economics)

This working paper examines resource allocation under private information when the planner cannot prevent bilateral side trading between consumers and firms. Adverse selection and side trading severely restrict feasible trades: each marginal quantity must be fairly priced given the consumer types who purchase it. Authors Andrea Attar, Thomas Mariotti and François Salanié (EconPol Europe and Toulouse School of Economics) discuss the relevance of the results for insurance and financial markets.

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cover of EconPol Working Paper 33

What Drives Chinese Overseas M&A Investment? Evidence from Micro Data

Clemens Fuest, Felix Hugger, Samina Sultan, Jing Xing

In recent years Chinese foreign acquisitions have increased significantly, with Chinese investors are more likely to acquire larger firms, firms with lower levels of profitability and higher debt. This EconPol working paper from Clemens Fuest (EconPol Europe, ifo Institute, LMU), Felix Hugger (LMU), Samina Sultan (LMU) and Jing Xing (Shanghai Jiao Tong University) shows investors don’t seem to pay more for target firms with given characteristics, questioning the view that they are subsidized to outbid other investors. Policy initiatives like the Belt and Road Initiative and Made in China 2025 influence state-owned but not private Chinese investors. After acquisition by a Chinese company, targets exhibit lower growth in capital productivity, but a higher growth of employee compensation.

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Cover of EconPol Policy Report 16

A Primer on Developing European Public Goods

Clemens Fuest, Jean Pisani-Ferry

The EU has mostly been defined as a provider of economic integration amongst participating member states. Its cornerstones have been the removal of obstacles to cross-border flows of goods, services, labour and capital, and the development of common policies that ensure the smooth functioning of an integrated market, be it for trade, competition, infrastructures or consumer protection, to name the main ones only. Even the euro was initially conceived as a natural complement to the internal market and as a trigger for further integration. This policy report from Clemens Fuest (ifo Institute, LMU, EconPol) and Jean Pisani-Ferry (EUI, Bruegel) discusses the case for enhanced provision of European public goods and makes a number of proposals for concrete steps and initiatives.

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Cover of EconPol Working Paper 32

Bond Exchange Offers or Collective Action Clauses?

Ulrich Hege, Pierre Mella-Barral

This paper by Ulrich Hege (Toulouse School of Economics) and Pierre Mella Barral (TBS Business School) examines two prominent approaches to design efficient mechanisms for debt renegotiation with dispersed bondholders: debt exchange offers that promise enhanced liquidation rights to a restricted number of tendering bondholders (favored under U.S. law), and collective action clauses that allow to alter core bond terms after a majority vote (favored under U.K. law). The authors use a dynamic contingent claims model with a debt overhang problem, where both hold-out and hold-in problems are present. They show that the former leads to a more efficient mitigation of the debt overhang problem than the latter. Dispersed debt is desirable, as exchange offers also achieve a larger and more efficient debt reduction relative to debt held by a single creditor.

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Cover of EconPol Working Paper 31

The Effect of Grandchildren on Grandparental Labour Supply: Evidence from Europe

Andreas Backhaus and Mikkel Barslund

In this working paper, Andreas Backhaus and Mikkel Barslund (Centre for European Policy Studies) find that women of later working age who become grandmothers are more likely to leave the labour market than women without grandchildren, according to new research from EconPol Europe. Male labour supply, however, does not significantly adjust in response to grandparenthood. The probability of women aged between 55 and 64 continuing to participate in the labour market can fall from an average of 45% to 15% after the arrival of grandchildren, according to the research. The negative effect of grandparenthood is particularly pronounced following the arrival of the first grandchild and for grandmothers who live close to their children.

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Cover of EconPol Working Paper 30

Fiscal Episodes in the EMU: Elasticities and Non-Keynesian Effects

António Afonso, Frederico Silva Leal

In this working paper, António Afonso (ISEG – Lisbon School of Economics and Management, Universidade de Lisboa; REM – Research in Economics and Mathematics, UECE) and Frederico Silva Leal (ISEG – Lisbon School of Economics and Management, Universidade de Lisboa; Portuguese Economy Ministry) estimate short- and long-run elasticities of private consumption for fiscal instruments. They find that positive tax revenue elasticities indicate that consumers have a Ricardian behaviour, while social benefits appear to have a non-Keynesian effect on private consumption. Private consumption continues to exhibit a non-Keynesian response to tax increases, and other expenditures have a recessive impact during normal times. After the launch of the EMU, expansionary fiscal consolidations became harder to observe.

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Cover of EconPol policy brief 18

SME Bank Financing, from a European Perspective

Karen van der Wiel, Andrei Dubovik, Fien van Solinge

Bank loans continue to be the main source of external financing for small and medium-sized enterprises (SMEs), in both the Netherlands and other European countries. Businesses are using those loans for expansion, innovation or as working capital.  But Dutch SMEs are applying for fewer bank loans, and those applications are often rejected by the banks. How does SME bank financing in the Netherlands relate to other European countries, and what are the reasons for the differences?

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