EconPol Policy Reports

The Eurosystem has become one of the crucial players in the market for euro area government bonds. After first substantive purchases through the Securities Market Programme (SMP) in 2010, the Eurosystem’s involvement has reached a new breadth and magnitude with the establishment of the Public Sector Purchase Programme (PSPP) in 2015. On top of this, the ECB Council has set up the Pandemic Emergency Purchase Programme (PEPP) in March 2020 in order to stabilize the euro area economy in the crisis and to contain the rise of sovereign risk premia.This study analyzes trends in the rules, volumes and country allocations of the two active sovereign purchase programmes, the PSPP and the PEPP. For an economic assessment, it is of importance to which extent the purchase programmes are of an asymmetric nature and whether the Eurosystem increasingly accepts the role of a strategic creditor who has veto power in debt negotiations.

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.