Existing literature suggests that firm R&D support policies stimulate private R&D within a country and that in most cases, the positive impact of government support is stronger on smaller firms. Recent evidence also indicates that some of the policy instruments, such as patent box policies, are tools that multinationals use to lower their total tax bill through profit shifting. In this policy report, İrem Güçeri (EconPol Europe, Oxford University), Marko Köthenbürger (EconPol Europe, ETH Zurich) and Martin Simmler (EconPol Europe, Oxford University) find that the most prevalent support policies are effective in fostering private enterprise sector R&D and small and young firms seem to benefit the most from both public R&D and R&D tax incentives.

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.

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.

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.

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.

The creation of the European Monetary Union (EMU) in 1999 was expected to become a catalyst for real convergence in Europe. However, the authors of this policy report find that real divergence actually increased from the early 1990s, as evidenced by low productivity growth in the "periphery" of the Euro area relative to "core" countries. The report investigates the role of sectoral reallocation in this divergence, focusing on three archetypal countries: France, Germany, and Spain.

The large deterioration in France’s current account balance during the euro’s first decade was mainly due to its poor export performances. Although there have been no more market share losses since 2012, French export growth lags behind that of our European partners. This EconPol policy report examines the continuing sluggishness of France’s trade performances over recent years, marked in particular by its surprising inability to make any significant and lasting reduction in the trade deficit or regain back lost market shares.

Providing financial incentives for companies to invest in productivity-enhancing technologies and practices is the key to productivity growth, according to this latest policy report by Cecilia Jona-Lasinio (ISTAT and LUISS Guido Carli), Stefano Schiavo (University of Trento) and Klaus Weyerstrass (Institut für Höhere Studien). Strong investment should also be made into training and workforce skills to exploit the productivity potential of new business models in the digital economy. Competition policy, although not directly related to productivity, is also emerging as an important tool to shape incentives and foster the efficient allocation of resources both across and within sectors and firms. The report analyses the recent trends in labour and total factor productivity in the EU and beyond and identifies factors that influence productivity.

Over the last year, exchanges that were initiated by the ZEW’s SEEK-conference on ‘regulating sovereign debt restructuring in the eurozone’ resulted in vivid discussions on more feasible sovereign debt restructurings in the euro area. This policy report, edited by Frederik Eidam and Friedrich Heinemann, summarizes these discussions by collecting several contributions on different aspects of the topic. Founded in different perspectives, contributors sometimes provide different conclusions, or highlight different choice options and their underlying trade-offs. However, common to all authors is the aim to increase the resilience of the European Monetary Union and to contribute on the debate on the European reform agenda.

This paper critically assesses several dimensions of a sovereign debt restructuring mechanism (SDRM) for the euro area, while abstaining from recommending one ideal model for a restructuring mechanism. Instead, authors apply a menu-type approach. For five key institutional SDRM dimensions, they discuss the underlying fundamental trade-offs and the pros and cons of different design choices. The analysis implies that there is no convincing reason to further taboo the search for a euro area SDRM, as there are ways to combine the opportunities of a credible SDRM with financial stability.