EconPol Policy Reports

Cover of EconPol Policy Report 15

Sectoral Reallocations, Real Estate Shocks and Productivity Divergence in Europe: a Tale of Three Countries

Thomas Grjebine, Jérôme Héricourt, Fabien Tripier

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.

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Cover of EconPol Policy Report 14

The Surprising Sluggishness of French Exports: Reviewing Competitiveness and its Determinants

Charlotte Emlinger, Sébastien Jean, Vincent Vicard

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.

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Cover of EconPol Policy Report 13

How to revive productivity growth?

Cecilia Jona-Lasinio, Stefano Schiavo, Klaus Weyerstrass

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.

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Cover of EconPol Policy Report 12

Towards more feasible sovereign debt restructurings in the euro area

Edited by Frederik Eidam and Friedrich Heinemann

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.

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Cover of EconPol Policy Report 11

The design of a sovereign debt restructuring mechanism for the euro area: Choices and trade-offs

Christophe Destais, Frederik Eidam, Friedrich Heinemann

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.

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Cover of EconPol Policy Report 10

An Unemployment Re-Insurance Scheme for the Eurozone? Stabilizing and Redistributive Effects

Mathias Dolls

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.

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Cover of EconPol Policy Report 9

What a feeling?! How to promote ‘European Identity’

Sarah Ciaglia, Clemens Fuest, Friedrich Heinemann

Authors of a new study conducted jointly by the Centre for European Economic Research (ZEW), Mannheim, and the ifo Institute for the EconPol Europe research network recommend that policymakers should do more to encourage citizens to identify with Europe. The authors suggest that Pan-European political consciousness could be encouraged by having citizens vote for European party lists, rather than national party lists in the European elections. An EU Citizens’ Assembly, say the report’s authors, should serve as a platform to discuss specific political issues and propose potential solutions. Europe could also raise its profile overseas through shared EU embassies and consulates.

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Cover EconPol Policy Report 8 2018

Dissecting the EU’s Recent Anti-Tax Avoidance Measures: Merits and Problems

Richard Collier, Seppo Kari, Olli Ropponen, Martin Simmler and Maximilian Todtenhaupt

Profit-shifting activities by multinational enterprises (MNEs) is widespread. Academics and policymakers agree that such activity should be curbed by diminishing the opportunities that exist within the international tax system The EU has legislated to reduce the scope for such activity, with a central tool being the Anti-Tax Avoidance Package. In this EconPol policy report, the authors argue that while elements of the package are likely to raise the minimum standards of anti-tax avoidance measures in Europe, they still leave scope for tax-planning. At the same time, the measures may lead to double taxation. They will also make the tax code more complex and distort firms’ decisions, generating social costs as a result. The balance between benefits and costs is not satisfactory. The authors discuss the pros and cons of other instruments like withholding taxes and formulary apportionment. While these measures would be of some help, in the long term, a fundamental reform of the international tax system is necessary.

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Cover of EconPol Policy Report 6

Which Role for a European Minister of Economy and Finance in a European Fiscal Union?

Zareh Asatryan, Xavier Debrun, Annika Havlik, Friedrich Heinemann, Martin G. Kocher and Roberto Tamborini

The European Commission has proposed to inaugurate a European Minister of Economy and Finance with the broad purpose of streamlining the complex and fragmented decision-making processes within the European Monetary Union. This policy report discusses the potential role the Minister could play in the development of the European Fiscal Union. The report lays out the main challenges along the current institutional solutions facing several dimensions of the Fiscal Union, in particular related to fiscal sustainability, macroeconomic shocks, incentives of structural reforms, and the optimum provision of European public goods. The report then discusses whether and to what degree the new European Minister of Economy and Finance can provide appropriate solutions to these challenges for the Fiscal Union.

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Cover of EconPol Policy Report 7

On the EU-US Current Account

Gabriel Felbermayr and Martin Braml

The first part of this short report uses the newest available data from the Bureau of Economic Analysis (BEA), an agency of the US Department of Commerce, to analyse economic relations between the US and the EU. The data is used to decompose the components of the US current account balance, and to analyse the bilateral balance of payments with the European Union, the Euro Zone and Germany. In the second part, we use data provided by Eurostat to mirror US figures. We find  enormous discrepancies between what the EU and the US report, particularly with respect to primary income.

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