Overview publications

Increasing the legal retirement age is politically feasible if policy contains the generosity of public pensions, conclude the authors of this EconPol working paper. After establishing three hypotheses within a politico-economic model and employing micro data for Germany, they demonstrate that a one percentage point increase in the share of the elderly increases the legal retirement age by 0.3 to 0.5 years, and that a 10 percentage point increase in the replacement rate reduces the legal retirement age by 0.5 to 3 years.

Does activism affect the acquisition and asset sale decisions of firms that are only indirectly affected by activists? Has activism grown sufficiently in importance that it influences the equilibrium in corporate asset markets, and what is its impact on the liquidity and efficiency of these markets? These are the questions posed by EconPol researcher Ulrich Hege and his co-author Yifei Zhang in this EconPol opinion examining the rise of shareholder activism and its international expansion.

How can a faster implementation of structural reforms fostering the process of economic convergence in Europe be achieved? In our latest policy brief, EconPol researchers discuss the rationale and potential adverse effects of providing financial incentives for structural reforms and present a proposal of national convergence roadmaps. Although these proposals deviate from the Commission proposal in some key dimensions, they reflect the fact that ensuring progress towards convergence targets is primarily a responsibility of the individual member states - not of the EU or European institutions and bodies like the European Commission and the Eurogroup.

Europe is becoming increasingly similar to the late Habsburg Empire, a powerful example of fragmentation and tendencies towards disintegration arising in multinational, multi-linguistic, and multi-ethnic integrated economic entities. To understand why and what the consequences may be, this year’s report by the European Economic Advisory Group (EEAG) at CESifo looks inside EU member states, where much besides European integration has been happening, and outside Europe, where powerful economic and geopolitical challenges have shaken many European countries and sectors.

A modern general equilibrium trade model to simulate the effects of the Chinese-American trade dispute finds that both economies lose, but China loses absolutely and relatively much more. In our latest policy brief, the authors analyse the potential impacts of an escalating trade war and find that while the bilateral tade balance of the US with China improves, it deteriorates with the EU and forebodes further transatlantic conflict.

In July 2017, Louis Rouanet argued that the bail out of two Italian banks, Veneto Banca and Banca Popolare di Vicenza, would be a ‘deathblow to the European Banking Union’. EconPol researcher Timo Wollmershäuser agrees, and says the correlation between risk premia for sovereigns and banks has since sharply increased to the high levels observed before the start of the Banking Union.

We assess, via system GMM, how Stock Flow Adjustments (SFA) affect the debt-to-GDP ratio in 65 countries (covering developed and emerging and low-income countries) between1985-2014. We find that SFAs positively contribute to the change in the debt-to-GDP ratio with a coefficient close to one. The existence of fiscal rules with monitor compliance contributes to lower the debt level. The fall in the debt ratio due to fiscal rules before the crisis was between 1.7%-4.2% of GDP while after the crisis, revenue and debt-based rules did not contribute to the reduction of debt, which was reinforced with large SFAs.

With negotiations between the EU and UK reaching deadlock, the only way forward seems to be a hard Brexit. In this policy brief, the authors suggest a model which will avoid a ‘no deal’ scenario and find that a minimum three-month extension is necessary in order to establish a European Customs Association.

This paper develops a decomposition framework to study the importance of different stabilization channels of an unemployment re-insurance scheme for the euro area. The paper provides insights on the potential added value of a re-insurance scheme which crucially hinges on its ability to provide interregional smoothing. Running counterfactual simulations based on household micro data for the period 2000-16, the paper finds that on average 15-25 per cent of the income losses originating from rising unemployment in deep recessions would have been absorbed through interregional smoothing effects. The results suggest that the interregional smoothing channel of the re-insurance scheme is economically as important as the intertemporal smoothing effect of an average domestic unemployment insurance scheme in the euro area. The latter would have led to a cushioning effect of 16-27 per cent of large unemployment shocks. The simulated re-insurance scheme would have been evenue-neutral at EA-19, but not at the member-state level. Average annual net contributions would have amounted to -0.1-0.1 per cent of GDP. No member state would have turned out as a permanent net contributor/recipient.

This paper investigates the impact of import competition on rent sharing between firms and employees using a large panel of French manufacturing firms. First, by applying recent advances in the estimation of price-costs margins, we are able to classify each firm into labour- and product-market regimes based on the presence/absence of market power and to estimate the degree of rent sharing among firms and workers. Second, we investigate the hypothesis that import penetration acts as a discipline device on the labour market, reducing workers’ bargaining power. We find that competition from OECD countries has a negative effect on bargaining power, whereas imports from low-wage countries have a more muted impact. By providing firm-level evidence for the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalisation on the labour market.