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21. The Crowding-out Effect of Mandatory Labour Market Pension Schemes on Private Savings: Evidence from renters in Denmark

Author:
Mikkel Barslund and Søren Arnberg
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper aims to estimate the crowding-out effect of the Danish mandatory labour market pension reforms begun in 1993 on the level of total household savings for renters. The effect is identified via a large panel of individual administrative records utilising the differences in speed, timing and sectoral coverage of the implementation of the reform in the period 1997 to 2005. Little substitutability was found between current mandatory labour market pension savings and private voluntary savings. Each euro paid into mandatory labour market pension accounts results in a reduction in private savings of approximately 0 to 30 cents, depending on age. This low rate of substitution is only, to a minor extent, explained by liquidity constraints. The results point to mandatory pension savings having a large effect on total household savings. Thus, pension reforms that introduce mandatory savings have macroeconomic implications.
Topic:
Economics, Labor Issues, and Reform
Political Geography:
Denmark

22. Future of Skills in Europe: Convergence or polarisation?

Author:
Miroslav Beblavý and Marcela Veselkova
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
In this Working Paper, based on nearly 20 papers produced by the Centre for European Policy Studies, Slovak Governance Institute and the Conference Board Europe, we examine whether the current trends in the areas of education and skills are pushing the European Union, towards convergence or polarisation. We cover a wide range of questions related to this main issue. No easy answers, but several cross-cutting messages emerged from the research. We demonstrated that there is increasing complexity in what a 'low-skilled' person is and how well (or poorly) s/he fares in the labour market. There are undoubtedly powerful forces pushing for more polarisation, particularly in the labour market. Our research confirmed that early childhood education plays an important role, and it also appears to be increasingly uncontested as a policy prescription. However, the other frequently emphasised remedy to inequality - less selection in secondary education, particularly later division of children into separate tracks - is more problematic. Its effectiveness depends on the country in question and the target group, while education systems are extremely difficult to shift even on a long-term basis. A different, more-nuanced type of warning to policy-makers is delivered in our research on returns to higher education by field of study, which showed hidden rationality in how students choose their major.
Topic:
Economics, Education, and Labor Issues
Political Geography:
Europe

23. The EU's Use of 'Targeted' Sanctions: Evaluating effectiveness

Author:
Clara Portela
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This study analyses the use by the European Union of the novel concept of 'targeted sanctions' in the framework of its Common Foreign and Security Policy. It examines two sets of sanctions regimes featuring different degrees of efficacy: in Myanmar and Zimbabwe, the EU wielded measures in support of human rights and democracy objectives in the absence of a United Nations mandate, while it supplemented UN sanctions to stop nuclear proliferation in Iran and North Korea. The study highlights a number of facilitators of, or hindrances to, the efficacy of sanctions, such as the degree of support by regional powers or the presence of UN legitimation. It concludes that the EU sanctions regimes could be optimised by using more robust measures, designing them on the basis of ex ante assessments, enabling faster upgrades, monitoring their impact and adjusting them regularly and improving outreach efforts.
Topic:
Foreign Policy, Diplomacy, Economics, Regional Cooperation, and Sanctions
Political Geography:
United States, Europe, United Nations, and Zimbabwe

24. The Potential Evolution of the European Energy System to 2020 and 2050

Author:
Arno Behrens, Jonas Teusch, and Caroline Coulie
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper assesses the impact of decarbonisation of the energy sector on employment in Europe. Setting the stage for such an assessment, the paper provides an analysis of possible pathways to decarbonise Europe's energy system, taking into account EU greenhouse gas emissions reduction targets for 2020 and 2050. It pays particular attention to various low-carbon technologies that could be deployed in different regions of the EU. It concludes that efficiency and renewables play a major role in any decarbonisation scenario and that the power sector is the main enabler for the transition to a low-carbon economy in Europe, despite rising electricity demand. The extent of the decline in the share of fossil fuels will largely depend on the existence of carbon capture and storage (CCS), which remains a major source of uncertainty.
Topic:
Economics, Energy Policy, and Science and Technology
Political Geography:
Europe

25. Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession

Author:
Thomas Barnebeck Andersen, Nikolaj Malchow-Møller, and Jens Nordvig
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates weathered the crisis much better than countries with other monetary regimes, predominantly countries with fixed exchange rates. Part of this difference in growth performance reflects differences in export performance during the initial years of the crisis, which in turn can be explained by real exchange rate depreciations. However, IT seems also to confer other benefits on the countries above and beyond the effects from currency depreciation.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Denmark

26. The EMS Crisis of the 1990s: Parallels with the present crisis?

Author:
Daniel Gros
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The EMS crisis of the 1990 s illustrated the importance of a lack of confidence in price or exchange rate stability, whereas the present crisis illustrates the importance of a lack of confidence in fiscal sustainability. Theoretically the difference between the two should be minor since, in terms of the real return to an investor, the loss of purchasing power can be the same when inflation is unexpectedly high, or when the nominal value of government debt is cut in a formal default. Experience has shown, however, that expropriation via a formal default is much more disruptive than via inflation.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Italy

27. Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries

Author:
Ansgar Belke, Anne Oeking, and Ralph Setzer
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The significant gains in export market shares made in a number of vulnerable euro-area crisis countries have not been accompanied by an appropriate improvement in price competitiveness. This paper argues that, under certain conditions, firms consider export activity as a substitute for serving domestic demand. The strength of the link between domestic demand and exports is dependent on capacity constraints. Our econometric model for six euro-area countries suggests domestic demand pressure and capacity-constraint restrictions as additional variables of a properly specified export equation. As an innovation to the literature, we assess the empirical significance through the logistic and the exponential variant of the non-linear smooth transition regression model. We find that domestic demand developments are relevant for the short-run dynamics of exports in particular during more extreme stages of the business cycle. A strong substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade.
Topic:
Economics, Human Rights, International Trade and Finance, and Financial Crisis
Political Geography:
Europe

28. Disappearing government bond spreads in the eurozone — Back to normal?

Author:
Paul De Grauwe and Yuemei Ji
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Since the announcement of the Outright Monetary Transactions (OMT) programme by Mario Draghi, President of the ECB, in 2012, the government bond spreads began a strong decline. This paper finds that most of this decline is due to the positive market sentiments that the OMT programme has triggered and is not related to underlying fundamentals, such as the debt-to-GDP ratios or the external debt position that have continued to increase in most countries. The authors even argue that the market's euphoria may have gone too far in taking into account the same market fundamentals. They conclude with some thoughts about the future governance of the OMT programme.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
Europe

29. Bail-in Provisions in State Aid and Resolution Procedures: Are they consistent with systemic stability?

Author:
Stefano Micossi, Ginevra Bruzzone, and Miriam Cassella
Publication Date:
05-2014
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
In July 2013, the European Commission adopted a new Banking Communication – the seventh since the start of the financial crisis – updating its criteria for the evaluation of state aid in the banking sector in response to the evolving economic and institutional environment. Under this Communication, any credit institution in need of recapitalisation or 'impaired asset' measures will be required, prior to any further action, to submit a plan for restructuring or the orderly winding down the bank. Moreover, whenever there is a capital shortfall, the Commission will require that, prior to any injection of public funds, not only shareholders – as has been the case so far – but also junior creditors write down or convert into equity their claims on the bank, regardless of whether the bank is under resolution, in order to minimise the need for state aid.
Topic:
Economics, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

30. Investment as the key to recovery in the euro area?

Author:
Daniel Gros
Publication Date:
11-2014
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The mantra in Brussels and all over Europe is that investment holds the key to recovery in the euro area. A central element of the new Commission's economic strategy is a proposed programme of investment of €300 billion.The emphasis on investment is not new, but has grown in strength as the euro area seems stuck in a never-ending recession.
Political Geography:
Europe