Current publications

Cover of EconPol Working Paper 39

Fiscal Consolidation and Automatic Stabilization: New Results

Mathias Dolls (EconPol Europe, ifo Institute, CESifo), Clemens Fuest (EconPol Europe, University of Munich, CESifo, ifo Institute), Andreas Peichl (EconPol Europe, University of Munich, CESifo, ifo Institute), Christian Wittneben (EconPol Europe, ifo Institute)

The share of income shocks absorbed by the tax and transfer system in the Eurozone declined from 48 percent in 2008 to 24 percent in 2011. For some of the countries most affected by the crisis, the stabilization effect was even negative in some years of the crisis, implying that the tax and transfer system amplified income shocks. In this EconPol working paper, Mathias Dolls (EconPol Europe, ifo Institute, CESifo), Clemens Fuest (EconPol Europe, University of Munich, CESifo, ifo Institute), Andreas Peichl (EconPol Europe, University of Munich, CESifo, ifo Institute) and Christian Wittneben (EconPol Europe, ifo Institute) analyze how the combined effect of automatic stabilizers and discretionary changes in tax-benefit systems affected the cushioning of income shocks. They propose a new summary measure of the combined effect of automatic stabilizers and discretionary policy changes based on micro data and counter-factual simulation. 

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Cover of EconPol Policy Report 19

Self-selection and Motivations of Emigrants from a Welfare State

Ilpo Kauppinen (EconPol Europe, VATT Institute for Economic Research), Till Nikolka (EconPol Europe, ifo Institute, LMU Munich), Panu Poutvaara (EconPol Europe, ifo Institute, LMU Munich)

This report analyzes self-selection and motivations of emigrants from Denmark, one of the richest and most redistributive welfare states in the world. Authors Ilpo Kauppinen (EconPol Europe, VATT Institute for Economic Research), Till Nikolka (EconPol Europe, ifo Institute, LMU Munich) and Panu Poutvaara (EconPol Europe, ifo Institute, LMU Munich) present evidence on how migrants are self-selected with respect to their education, earnings, and unobservable abilities, measured by residual earnings. They document main motivations of emigrants, present evidence on how couples have self-selected into emigration, how couples decided on their emigration and how the partners’ labor force participation changed after emigration. Finally, they ask whether emigrants differ from non-migrants in terms of their attitudes towards redistribution.

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Cover of EconPol Policy Report 18

Structural Reforms and Income Inequality: Who Benefits From Market-Oriented Reforms?

Klaus Gründler (EconPol Europe, ifo Institute, LMU Munich), Niklas Potrafke (EconPol Europe, ifo Institute, LMU Munich), Timo Wochner (LMU Munich)

Do structural reforms benefit individual groups? Klaus Gründler (EconPol Europe, ifo Institute, LMU Munich), Niklas Potrafke (EconPol Europe, ifo Institute, LMU Munich) and Timo Wochner (LMU Munich) employed macro and micro data to investigate whether the income of low-income citizens increased to a smaller extent than the income of high-income citizens. The results suggest not: market oriented reforms were positively correlated with income shares of low-income citizens, and low-income citizens are less likely to support market-oriented reforms than high-income citizens. It is conceivable that low income citizens have misperceptions about how they benefit from market-oriented reforms.

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Cover of EconPol Working Paper 38

Monetary Policy, Rational Confidence and Neo-Fisherian Depressions

Lucio Gobbi (EconPol Europe, University of Trento), Ronny Mazzocchi (European Parliament), Roberto Tamborini (EconPol Europe, University of Trento)

The "Neo-Fisherian" claim has been questioned on the ground that the Fisher equation cannot be used mechanically to peg the long-run inflation expectations. In this working paper, authors Lucio Gobbi (EconPol Europe, University of Trento), Ronny Mazzocchi (European Parliament) and Roberto Tamborini (EconPol Europe, University of Trento) study a New Keynesian economy where agents' inflation expectations are based on their correct understanding of the data generations process, and on their probabilistic confidence in the central bank's ability to keep inflation on target. They find that the Neo-Fisherian claim is a theoretical possibility depending on the interplay of a set of parameters and very low levels of agents' confidence. 

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Cover of EconPol Policy Report 17

Is Immigration Necessary for Italy? Is it Desirable?

Luigi Bonatti (EconPol Europe, University of Trento)

Italy, together with other Southern European countries, represents an anomaly in the history of modern migration. In the last three decades, the country has attracted a substantial number of migrants while its employment rate has remained structurally low because of a persistently high unemployment rate and its population’s low participation to the labor market. This article illustrates some facts in order to escape from the obtuse dispute between anti-immigrant propagandists on one side and a rhetoric of immigrant reception on the other. It shows what this anomaly implies and suggests possible policy options for dealing with it.

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Cover of EconPol policy brief 20

Trade Deficit with China – an Issue for the Euro Area?

Klaus Weyerstrass, EconPol Europe and IHS Vienna

The rise of China in the world economy and its growing importance as investor in industrialised and developing countries has raised concerns of policy makers in some countries. Contrary to the trade situation between China and the US, trade between the euro area aggregate and China is almost balanced. On an individual country level, Germany, Ireland and Finland record trade surpluses with China. As trade between the euro area and China is balanced, there is no need for policy action to address any imbalance, however, European markets should only be opened for Chinese companies and investment if this is reciprocated.

Video: Current Account Development Between the Euro Area and China, Klaus Weyerstrass

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Cover of Working Paper 37

Euro Area Reform Preferences of Central and Eastern European Economic Experts

Sebastian Blesse (EconPol Europe, ZEW Mannheim), Annika Havlik (EconPol Europe, ZEW Mannheim and University of Mannheim), Friedrich Heinemann (EconPol Europe, ZEW Mannheim and University of Heidelberg)

A variety of reforms have been implemented to improve the institutional set-up of the euro area over the last decade. Nevertheless, the political and academic reform debate remains intense and the future of the euro area is unclear. One striking feature of the ongoing debate is that it is characterized prominently by contributions from larger euro countries from Western Europe. This study was conducted to balance the dominance of Western European politicians and academics in the euro area reform debate. It explored the positions of 1800 economic experts from Central and Eastern European member states on a range of European Monetary Union reform topics, which were compared to benchmarks of surveyed experts in France, Germany and Italy. The results provide the first database to map expert communities in all CEE EU member states relative to the three reference countries.

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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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