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791. Political Parties, Institutions, and the Dynamics of Social Expenditure in Times of Austerity

Author:
Herbert Obinger and Bernhard Kittel
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The containment of social expenditure growth has been (and still is) a core issue of public policy in advanced industrial countries since the 1980s and has received much academic attention during that period. Among the most extensively discussed explanatory factors of social expenditure are partisan politics and political institutions, as well as the dependency of the real impact of the former on the latter. The paper distinguishes five competing theoretical perspectives and explores their power to explain the empirical variation in the period 1982–1997 in 21 OECD countries. The empirical analysis of short-term dynamics is performed in a time-series cross-section framework while long-term level effects are explored in a cross-sectional setting. By using an interactive model specification the authors show that there is empirical evidence for this conditional effect, albeit it is neither thoroughly convincing nor leading to lasting long-term level effects. Extensive specification tests show that the 1990s witnessed a weakening of partisan effects which were still present in the 1980s. In total, the evidence tends to give most support to the “growth-to-limits” and the “new politics” perspectives.
Topic:
Economics, Government, International Trade and Finance, and Political Economy

792. The Declining Use of Unskilled Labour in Italian Manufacturing: Is Trade to Blame?

Author:
Paul Brenton and Anna Maria Pinna
Publication Date:
12-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
As in other industrialised countries, the manufacturing sector in Italy has recently experienced a substantial increase in the use of skilled relative to unskilled workers — skill upgrading. In this paper we estimate a model, based upon the notion of outsourcing, of the relative demand for skilled labour which allows identification of the roles of technological change and trade, the two main culprits, in skill upgrading. Compared to previous studies of Italy the model is applied to highly disaggregated industrial data and in addition the impact of trade is more precisely measured through the separate identification of import flows from low-wage labour abundant countries and those from OECD partners. Furthermore we also introduce a measure of trade variability. Our results show firstly that economic variables played little or no role in determining the relative demand for unskilled workers in the 1970s in Italy, reflecting the nature of Italian labour market institutions in the period. Subsequently, in the 1980s and 1990s, following some labour market reforms, we find that international competition, in terms of import penetration and the variability of trade prices, had a significant effect on the relative demand for blue-collar workers in Italy in skilled intensive sectors. In unskilled intensive sectors, such as textiles and clothing, where the impact of imports from low-wage countries might be expected to be more pronounced, we do not find a significant effect from imports but rather that the most important role has been played by technological change. The result is consistent with previous studies that indicate that Italian textile and clothing firms have remained internationally competitive by increasingly switching to high quality segments of the industry.
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe and Italy

793. Shaping Europe's Migration Policy

Author:
Joanna Apap
Publication Date:
12-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
During the 1990s, Justice and Home Affairs moved, in an unexpected way, to centre stage in the European debate. Concern had been growing about immigration policy since the Maastricht Treaty institutionalised the third pillar of the European Union. This concern had been stimulated by several factors – the persistence of irregular migration and tragic incidents, such as the one in Dover in July 2000 in which 58 Chinese nationals lost their lives trying to enter illegally into the United Kingdom, the need for immigrant workers in some sectors, and the spectre of an ageing European population. More generally, the Treaty of Amsterdam, since its entry into force in 1999, represents a major development in overall Justice and Home Affairs policy, and the implementation of the treaty provisions in Justice and Home Affairs was described as the next major EU initiative after the single currency.
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe

794. What Are the Limits to Economic Integration?

Author:
Paul Brenton
Publication Date:
11-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper discusses the continuing importance of borders, even within the EU, for the volume of international trade and global capital flows. It suggests that a range of factors, including the nature of the commercial, social and legal fabric of a country and the structure of consumers' preferences, act to constrain cross-border exchanges relative to internal transactions. Hence, whilst the process of globalisation may continue, there are likely to be distinct limits to the extent of economic integration. This entails that the traditional roles of governments in OECD countries in providing social welfare and regulating the market economy within national boundaries will not be seriously undermined. However, the situation may differ in developing countries where existing social and legal institutions may be compromised by globalisation rather than acting to dampen its impact.
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe

795. Fiscal Policy Spillovers in the Euro Area: Where Are They?

Author:
Daniel Gros and Alexandr Hobza
Publication Date:
11-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
What impact would a fiscal expansion in Germany have on the rest of the euro area? It has been generally suggested that it could go in either of two opposite directions, depending on the relative strength of two effects: the direct trade linkage and the financial market repercussions. A review of the results from four major macroeconomic models shows that the cross-country spillover effects of fiscal policy are indeed of uncertain sign and magnitude. Different models give quite different results if used in standardised simulations in terms of the sign, magnitude and time profile of the impact of a fiscal expansion in one member country (e.g. Germany) on other euro area countries. Fewer results are available concerning the potential spillover effects of structural policies, but they are similar to the ones concerning a budgetary stimulus: the magnitude of the spillover is small and varies across countries and over time.
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe and Germany

796. Seigniorage: An Argument for a National Currency?

Author:
Fransizka Schobert
Publication Date:
10-2001
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Seigniorage has often been mentioned as one of the most important and most readily quantifiable arguments for a government not to give up its monopoly in base money. The analysis shows that the measurement of seigniorage may lead to very different results and that it eventually depends on the monetary environment, in which central banks issue and manage base money. For less advanced countries in Central and Eastern Europe seigniorage has only been fiscally significant in high inflationary economies and even then the success in exploiting seigniorage has been limited. Widespread currency substitution has contributed to the results. Governments in these countries which are willing to stabilise prices but which lack crediblity to do so, may be increasingly interested in euroisation. More advanced EU-accession countries have received low revenues from having a national currency over the recent years. Seigniorage has arisen as a by-product of other central bank's objectives such as price and exchange rate stability. This caused high sterilisation costs and valuation gains of the central bank's asset portfolio have often been the main reason for positive results of seigniorage. In search for a viable monetary regime and in face of further liberalisations of capital markets these countries may look at euroisation as a choice to achieve price stability without exchange rate volatility.
Topic:
Economics and Political Economy
Political Geography:
Europe

797. 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

798. 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

799. 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

800. 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