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131. Extending Citizenship Rights to Third Country Nationals

Author:
Joanna Apap
Publication Date:
10-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Various issues arise in the European context with respect to the boundaries of citizenship; one of the main questions is to what extent the division between the European Union citizens and third country nationals will increase, especially if “deepening” of the Union leads to more tightening of its external borders. This paper addresses the question of how far citizenship rights can be extended to third country migrants in the EU?
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe

132. What Drove Relative Wages in France? Structural Decomposition Analysis in a General Equilibrium Framework, 1970-92

Author:
Sébastien Jean and Olivier Bontout
Publication Date:
09-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper confronts a CGE model to observed evolutions in France, between 1970 and 1992, through a structural decomposition analysis. The choice of the model and the assumption of constant elasticities over time enable the structural change of the economy between two equilibria to be summarised through a set of four types of state variables, reflecting the effect of technical change, changes in factor supplies, shifts in consumption patterns, and international trade. Simulations then allow the contribution of each of these shocks to be assessed. We find that technical change had a strong positive impact on the relative wage of skilled to unskilled workers, while the impact of changes in factor supplies is strongly negative. The effect of international trade is far less important. However, if we take into account a trade-induced effect on productivity, then we find that trade substantially increased wage inequalities.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
China, Europe, and France

133. Is the ECB Sufficiently Accountable and Transparent?

Author:
Daniel Gros and Lorenzo Bini-Smaghi
Publication Date:
09-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
More than two years after its inception, the ECB is still perceived as lacking transparency by many academics and market participants. Our analysis, based on a series of indicators, suggests instead that the ECB is, at least on paper, one of the most transparent and accountable central banks. The discrepancy between theory and public perception suggests that much remains to be done within the given institutional framework to improve the transparency of the ECB. What is the best way to achieve this goal? Several suggestions have been put forward, such as publishing the detailed minutes of the ECB Governing Council meetings. This would result in shifting the true debate to informal meetings of the Governing Council, while formal meetings would only record pre-packaged consensus with no or little discussion. In our view, the best way to make the ECB more accountable is to engage it in substantive discussions about its policy. The ECB should provide more information about the background analysis that leads to policy decisions. For example, the ECB should transform its 'staff projections' into true inflation forecasts and it should be more open about the arguments that shape the internal debates, which precedes decisions. Accountability cannot be ensured by the ECB alone. An important role has to be played by its counterparts, such as the European Parliament, the Council of EU Finance Ministers and the public at large.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe

134. Maastricht the Choice of Exchange Rate Regime in Transition Countires During the Run-Up to EMU

Author:
György Szapáry
Publication Date:
05-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper raises some specific issues concerning the choice of exchange rate regime in transition countries during the run-up to EU/EMU membership. It argues that there is no "one-size-fits-all" exchange rate regime that accession countries should uniformly adopt. It also argues that the Maastricht criterion on inflation is inconsistent with the catching-up process because of the Balassa-Samuelson effect and that this inconsistency will encourage a "weighing-in" syndrome: like the boxer who refrains from eating for hours prior to the weigh-in only to consume a big meal once the weigh-in is over, the candidate country will maintain very tight monetary policy and resort to all sorts of techniques (freezing of administered prices, lowering of consumption taxes, etc.) to squeeze down inflation prior to accession only to shift back gears after it has joined the EMU. Indeed, the convergence of short-term interest rates to EMU levels that will come with accession will automatically mean a loosening of monetary policy after the country has become a member of the monetary union. That loosening will be reinforced if the country had previously allowed its exchange rate to appreciate against the euro. The result of this stop-go cycle is that the efficiency of economic management will suffer. It would be better to recognize the principle of the Balassa-Samuelson effect explicitly in the Maastricht criteria by giving more room for maneuver than the one provided by the present rule. The paper makes suggestions on how the Maastricht criterion on inflation could be adjusted and discusses their merits. It concludes that a reasonable compromise would be to define the permissible inflation deviation in reference to the average inflation rate of the euro zone, not the three EU members with the lowest inflation rate.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe

135. Foreign Direct Investment and Company Taxation in Europe

Author:
Agnès Bénassy-Quéré, Lionel Fontagné, and Amina Lahrèche-Révil
Publication Date:
04-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The growing globalisation of OECD economies, associated to the progresses in European integration, tends to increase the mobility of capital and to deepen the pressure on tax policies. On the one hand, tax policies are tied by the Stability Pact criteria: the limit imposed on budget deficits leaves little scope for tax rates to decrease. On the other hand, the growing mobility of capital tends to increase the elasticity of tax bases to tax rates, hence reducing the autonomy of governments in increasing taxes.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe

136. Economic Integration Between the EU and the CEECS: A Sectoral Study

Author:
Francesca di Mauro
Publication Date:
04-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Economic integration between the EU and the CEECs has proceeded at high speed over the 90's, with the main channels of such integration being trade and FDI. Some authors believe that the 'commercial transition' is now complete and that a new, deeper phase of integration has started, with growing flows of FDI in the region. Following a gravity-type approach, in this paper I tackle two difficult issues surrounding the EU-CEECs integration: has FDI in the CEECs region substituted EU exports, therefore harming employment at home? Has FDI in the CEECs region been redirected away from similarly attractive countries, such as Spain and Portugal? By using a unique database on FDI broken down by country and by sector, which allows more detailed qualifications than possible in previous work, the answers to these two questions appear to be negative.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe, Spain, and Portugal

137. Who Needs an Extenal Anchor?

Author:
Daniel Gros
Publication Date:
03-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper argues that there might be non-monotonic relationship between the strength of the domestic framework for fiscal policy and the interest of a country to use an external anchor to achieve price stability. Countries with a strong domestic framework, e.g. low public debt, little pressure for excessive expenditure and an efficient tax system, would anyway enjoy low inflation rates and therefore have little need for an external anchor. Countries with high debt or very weak institutions would greatly benefit from an external anchor to save them from the extreme inflation rates they would otherwise have to endure because the market knows that the temptation for them to inflate public debt away is so strong. By contrast, countries with moderately weaknesses might be in a situation where they need some inflation to supplement government revenues with seigniorage, but the inflation resulting from the interaction with the market, which knows about this, is still moderate.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe

138. What's Trade Got To Do With It? Relative Demand for Skills within Swedish Manufacturing

Author:
Paul Brenton, Bob Anderton, and Eva Oscarsson
Publication Date:
03-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper seeks to identify the contribution of trade and technological change to the increase in inequality between skilled and unskilled workers in Sweden since the 1970s. An empirical approach is adopted which allows for the outsourcing of the low-skill parts of the production chain within industries to low-wage locations and is applied to detailed industry and trade data, the latter distinguishing between low-wage sources of imports and OECD countries. Another feature of the study is the use of data on patents to capture technological change. The paper finds that, in contrast to previous studies, trade with low-wage countries may have contributed to the rise in inequality in Swedish manufacturing. Here we identify this effect through changes in relative import prices and through changes in import penetration measured in volume terms. Changes in import penetration measured in value terms, which have been used in previous studies, are not found to be significant. In addition imports seem to have had a larger effect on inequality in high-skill intensive sectors rather than the low-skill sectors. The empirical results also suggest that the increased use of technology also played a role in creating greater inequality between skilled and unskilled workers in Sweden with the magnitude of this impact increasing in the 1990s.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe and Sweden

139. Skill Upgrading and Production Transfer within Swedish Multinationals in the 1990s

Author:
Pär Hansson
Publication Date:
03-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper studies the link between production transfer in Swedish-headquartered multinational enterprises (MNEs) and skill upgrading in Swedish manufacturing in the 1990s. The analysis distinguishes between horizontal and vertical foreign direct investment (FDI). The increased employment share in affiliates in non-OECD countries (vertical FDI) has a non-trivial, significantly positive effect on the share of skilled labour in the Swedish parents. On the other hand, the skill upgrading in the parents is unrelated to employment changes in their affiliates in other OECD countries (horizontal FDI). The latter is consistent with implications of the newly developed horizontal MNE models.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe and Sweden

140. European Labour Markets and the Euro: How Much Flexibility Do We Really Need?

Author:
Michael C. Burda
Publication Date:
03-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Widespread concern over real effects of EMU is consistent with new Keynesian approaches to macroeconomic fluctuations, but more difficult to reconcile with a real business cycle (RBC) paradigm. Using a model with frictions as a point of departure, I speculate that nominal price rigidity in Europe is likely to increase, while real rigidities are likely to decrease, as a consequence of monetary union. This logic implies a new European macroeconomic regime in which monetary policy is increasingly "effective" in influencing output in the short run. Similarly, changes in the nature of real and nominal price determination are likely to increase the volatility of the European business cycle. Empirical evidence of increasing covariation of price inflation and declining correlation of wage inflation and real wage growth within EMU countries in the last decade is consistent with this conjecture. Calls for additional labour market flexibility, given the magnitude of what is already in store for Europe, may be unwarranted.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Europe