CPB Discussion papers

n° 200, Décembre 2011

Did you really save so little for your retirement? An analysis of retirement savings and unconventional retirement accounts
MASTROGIACOMO Mauro, AALESSIE Rob

We use a confirmatory factor analysis to study the relation between the importance of a broad spectrum of saving motives, such as saving for retirement, and saving behavior. Survey data show that many respondents save for retirement in unconventional retirement accounts, such as investments in real estate. We show that finding the retirement motive important does not directly translate in additional retirement savings. We show that the annuity stream generated by conventional and unconventional accounts from age 65 onwards is small and that most savings are residual and are not being put aside for a specific motive. Also self-employed retirement savings are low, even though this group has generally no occupational pension.

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n° 199, Décembre 2011

The link approach to measuring consumer surplus in transport networks
VAN'T RIET Maarten

Should one calculate user benefits from changes in door-to-door journeys or from changes in the use of separate links of the network? The second approach is often discarded for its perceived inability to deal with new links and the OD-matrix approach is favoured. Differences arise when the set of used routes changes. A consumer model containing a general static transportation network with explicit non-negativity constraints serves as a basis for welfare measures expressed in shadow prices. The approximation error when applying the link approach need not be too severe. A rehabilitation of the link approach may be in order.

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n° 198, Décembre 2011

Wage-Tenure Profiles and Mobility
DEELEN Anja

The Dutch labour market is characterized by low job mobility and high average unemployment duration. This study investigates the role of wage-tenure profiles in explaining patterns of job mobility. Based on a large administrative database, the estimates show that wage-tenure profiles in the Netherlands are relatively steep. Furthermore, industries with high returns to tenure appear to have a high share of older workers, as well as high average job tenure. This implies that steep wage-tenure profiles are related to low levels of mobility.

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n° 197, Décembre 2011

Will ageing lead to a higher real exchange rate for the Netherlands?
VAN EWIJK Casper, VOLKERINK Maikel

Long-term projections for the Netherlands indicate that demand for nontradables – e.g. health care services – will increase relative to supply due to population ageing. If this leads to higher future real exchanges rates this will erode the return of the savings currently made to prepare for ageing. This paper explores the magnitude of potential price effects using a modified version of the ‘two country, four commodity framework’ developed by Obstfeld and Rogoff (2005) to explore the exchange rate effects of the balance of payments reversal in the US. When these price effects are substantial, this may have serious consequences for policies to enhance national saving in the Netherlands.

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n° 196, Décembre 2011

Wage inequality in trade-in-tasks models
ROJAS-ROMAGOSA Hugo

Recent trade-in-tasks models suggest that relative low-skill wages (in rich high-skill abundant countries) may increase when low-skill tasks are offshored. However, using extensive numerical simulations of these models we find that wage inequality is increasing for almost all endowment combinations (i.e. relative country sizes) when we use a broad range of parameter values and model specifications. The most common exception is when the country is relatively small and cannot affect international prices. In the case of relatively poor lowskill abundant countries, we find that offshoring is always welfare improving, but wage inequality effects are ambiguous. Finally, we find that a trade-intasks model with three skill-types can also account for wage polarization whenwe allow medium-skill tasks to be offshored.

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n°195, Novembre 2011

Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners
EUWALS Rob

This paper investigates the impact of financial incentives on early retirement behaviour for high and low wage earners. Using a stylized life-cycle model, we derive hypotheses on the behaviour of the two types. We use administrative data and employ two identification strategies to test the predictions. First, we exploit exogenous variation in the replacement rate over birth cohorts of workers who are eligible to a transitional early retirement scheme.

Second, we employ a regression discontinuity design by comparing workers who are eligible and non-eligible to the transitional scheme. The empirical results show that low wage earners are, as predicted by the model, more sensitive to financial incentives. The results imply that low wage earners will experience a stronger incentive to continue working in an optimal early retirement scheme.

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n° 194, Novembre 2011

Reducing Rents from Energy Technology Adoption Programs by Exploiting Observable Information
AALBERS Rob, DE GROOT Henri

In this paper, we study how regulators may improve upon the efficiency of their energy technology adoption programs by exploiting readily observable information to limit rent extraction by firms. Using panel data on 862 in- vestment decisions in the Netherlands, we find that rent extraction is closely linked not only to technology characteristics, but also to the firm's capital budgetting technique. In particular, we find that firms are more likely to extract rent when either the technology's pay-back period or its required in- vestment is lower, but less likely if they do not use a formal capital budgeting technique. Standard firm characteristics, such as size and sector, correlate with firms' use of capital budgeting techniques, thereby partly resolving the regulator's asymmetric information problem.

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n° 193, October 2011

The potential of a small model
ELBOURNE Adam, TEULINGS Coen

This discussion paper highlights potential uses of simple, small models where large traditional models are less exible. We run a number of experiments with a small two variable VAR model of GDP growth and unemployment with both quarterly and yearly data. We compare the forecasts of these simple models with the published forecasts of the CPB and we conclude that there is not much difference. We then show how easy it is to evaluate the usefulness of a given variable for forecasting by extending the model to include world trade. Perfect knowledge of future world trade growth would help considerably but is obviously not available at the time the forecasts were made. The available world trade data doesn't improve the forecasts. Finally we also show how quick and exible measures of the output gap can be constructed.

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n° 192, October 2011

Optimal regulation under unknown supply of distributed generation
AALBERS Rob, KOCSIS Viktória, SHESTALOVA Victoria

As distributed generation (DG) continues to expand, larger low-voltage networks will be required in the future. However, regulated distribution network operators (DNOs) need to invest in new infrastructure without knowing a relevant determinant of network costs, the future amount of DG. Due to uncertainty, optimal network capacity needs to reflect the expected demand for capacity over all possible DG states. Therefore, not all capacity will be used if a low level of DG occurs. Optimal regulation that is set under asymmetric information about future DG needs to create incentives for the DNO to invest in this 'excess capacity' and also encourage optimal network utilization. In this case, an option menu that includes fixed fees and positive network charges on DG-producers fulfills these requirements and implements the first-best optimum. On the contrary, price-cap and revenue-cap regulation lead to either underinvestment or high information rents to the DNO.

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n° 191, October 2011

Agglomeration Externalities and Urban Growth Controls
VERMEULEN Wouter

Should constraints on urban expansion be relaxed because of external agglomeration economies? In a system of heterogeneous cities, we demonstrate that second-best land use policy consists of a tax on city creation and a subsidy (tax) on urban development in cities in which the marginal-average productivity gap is above (below) average. However, the implementation of this policy requires coordination at the system level. A tax on city creation does not raise welfare if development taxes are set decentrally by competitive urban developers, nor does correction of these taxes raise welfare if a tax on city creation is unavailable. In the resulting constrained optimal allocation, urban development is subsidized in all cities. The quantitative significance of these findings is explored in an application of our model.

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n° 190, October 2011

Dutch Sectoral Energy Intensity Developments in International Perspective, 1987–2005
MULDER Peter, DE GROO Henri L.F.

This paper makes use of a new dataset to investigate energy intensity developments in the Netherlands over the period 1987–2005, in comparison with 18 other OECD countries. A key feature of our analysis is that we combine this cross-country perspective with a high level of sector detail, covering 51 sectors. Particularly innovative is our evaluation of energy intensity developments in a wide range of Service sectors. We find that between 1987 and 2005 energy intensity in the Netherlands decreased on average with 0.9% points per year at the aggregate economy level and with 0.2% points at the aggregate manufacturing sector level, whereas it increased with 0.4% points at the aggregate Service sector level. This performance is considerably below the OECD average, and has been especially poor between 1987 and 1995. In terms of energy intensity levels, performance of the Netherlands is close to the OECD average at the aggregate economy level and in Manufacturing. In Services, the energy intensity level in the Netherlands was about 50% lower than the OECD average in 1987, but this lead has almost disappeared by 2005. Finally, we find that in the Manufacturing sector, between 1987 and 2005, about half of the energy efficiency improvements were undone by a shift towards a more energy-intensive industry structure, most notably through growth of the Chemical sector. In the Service sector, on the contrary, shifts in the underlying sector structure helped in slowing down energy intensity increase by about one-third between 1987 and 2005.

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n° 189, August 2011

A note on the Shapley value for characteristic functions on bipartitions
MUNS Sander

We consider a cooperative game with a bipartition that indicates which players are participating. This paper provides an analytical solution for the Shapley value when the worth of a coalition only depends on the number of participating coalition players. The computational complexity grows linearly in the number of players, which contrasts with the usual exponential increase. Our result remains true when we introduce (i) randomization of the bipartition, and (ii) randomly draw a characteristic function.

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n° 188, August 2011

Fixed export costs and multi-product firms
CREUSEN Harold,SMEETS Roger

This paper has two aims. First, we uncover some salient components of fixed export costs, which play a crucial role in recent heterogeneous firms models of international trade. Second, we investigate whether the importance of these fixed export costs varies with the size of a firms export product portfolio. We find that a destination country' s institutional quality, such as the quality of regulation or the extent of corruption, form important impediments to a firm's export decision, lowering the export probability by up to 10%-points. Moreover, relative to single-product firms, multi-product firms experience additional export probability decreases of around 2%-points.

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n° 187,  August 2011

The effect of the supplementary grant on parental contribution
EBENS Michelle, VAN ELK Roel, WEBBINK Dinand, BOOIJ Adam

Recently, there has been considerable debate about a reform of the Dutch system of student support, in which grants will be (partly) replaced by loans. The discussion focuses on the effects on student enrollment decisions. Surprisingly, no study has yet analysed the effect of receiving a grant on parental contribution. Parents may decrease their contribution when their child receives a grant, in which case subsidies meant for the students unintentionally end up with the parents. Understanding the corresponding parental behaviour will contribute to a more in-depth
discussion on the financial aid system.This paper focuses on the effect of the supplementary grant on the parental contribution in the Netherlands. The supplementary grant is meant to support students from disadvantaged families. Parents from students with the supplementary grant have less disposable income, which probably implies a lower contribution. Our identification strategy separates this income effect from the effect due to the payments of the supplementary grant. The results suggest substantial substitution. Each additional euro spent on supplementary grant reduces the parental contribution with approximately 20-60 cents. A broad range of sensitivity analyses support our main estimation results. Nevertheless, some caution in interpreting the results is needed because of data limitations.

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n° 186, July 2011

Wage inequality in the Netherlands: Evidence, trends and explanations
GROOT Stefan, DE GROOT Henri

For many years, the Netherlands has been considered an exception to the general trend of growing wage inequality that most OECD countries have experienced since the 1980s. This OECD trend is generally explained by increasing relative demand for skilled labour due to skill biased technological progress and – to a lesser extent – by globalization. Using detailed micro data on the entire wage distribution in the Netherlands, this paper examines trends in Dutch (real pre-tax) wage inequality between 2000 and 2008. We show that the aggregate flatness of the distribution hides dynamics between different groups and regions. We find that inequality, after correcting for observed worker characteristics, decreased somewhat at the lower half of the wage distribution, while increasing slightly at most of the upper half (both before and after correcting for differences in human capital). Residual wage inequality is high and increasing in most larger cities, which is in line with recent evidence on the increasing importance of agglomeration externalities.

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n° 185, July 2011

The decentralization of Social Assistance and the rise of Disability Insurance enrolment
ROELOFS Gijs, VAN VUUREN Daniel

Many economists and policymakers believe that fiscal decentralization, the decentralization of government expenditures to local governments, enhances public sector efficiency. Vertical externalities – i.e. spillovers between local and central government – may however undo part of this advantage. In this paper, we assess spillover effects of Social Assistance (SA) decentralization in the Netherlands, in particular towards (a centrally administered) Disability Insurance scheme (DI). DI enrolment strongly increased since the decentralization of SA. We find that the sensitivity of local DI enrolment with respect to the stock of local SA recipients has increased over time, given that we control for both observed and unobserved disability risk factors. IV estimates show that, since the decentralization of SA, at least one third of DI inflow was diverted from SA.

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n° 184, July 2011

Regional wage differences in the Netherlands: Micro-evidence on agglomeration externalities
GROOT Stefan, DE GROOT Henri, SMIT Martijn

Based on micro-data on individual workers for the period 2000–2005, we show that regional wage differentials in the Netherlands are small but present. A large part of these differentials can be attributed to individual characteristics of workers. Remaining effects are partially explained by variations in employment density, with an elasticity of about 3.8 percent and by Marshall-Arrow-Romer externalities, where doubling the share of a (2-digit NACE) industry results in a 2.4 percent higher productivity. We find evidence for a negative effect of competition (associated with Porter externalities) and diversity (associated with Jacobs externalities).

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n° 183, June 2011

Uncertainty and the export decisions of Dutch firms
CREUSEN Harold, LEJOUR Arjan

This paper analyses the export market entry decisions of Dutch firms and their subsequent growth or market exit. When entering new markets, firms have to learn market conditions and have to search for new trade relations under uncertainty. We show that firms follow a stepping stone approach for reaching markets further away (physically and culturally) by including the distance to accessed export markets in our analysis. They first enter more nearby markets before moving to more distant markets. Moreover, we find that the presence of support offices and trade missions in destination countries, particularly middle income countries, stimulate the entry of new exporters and export growth. Knowledge spillovers from firms with the same export destinations have also positive effects on market entry. These conclusions follow from using detailed international trade data by firm and destination between 2002 and 2008 combined with firm data and export market characteristics. We find that about 5% of all Dutch exporters have just started in their first market and a similar share of exporters ceases all exports. Still, the starting exporters increase their exports very fast. In each market their export growth in their third year as exporter is about twice as high as for established exporters. Many starters also increase their exports by expanding their number of destinations, but they will retreat swiftly if they are not successful. For all exporters, we find that more productive and larger firms are more inclined to enter (additional) export markets, and that larger firms are less likely to leave a market. Market characteristics are important as well. Distance to the home country (apart from distance to accessed export markets) and import tariffs reduce the probability to enter the market and increase the probability to exit.

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n° 182, June 2011

Retirement Flexibility and Portfolio Choice
ADEMA Yvonne, BONENKAMP Jan, MEIJDAM Lex

This paper explores the interaction between retirement exibility and portfolio choice in an overlapping-generations model. We analyse this interaction both in a partial-equilibrium and general-equilibrium setting. Retirement exibility is often seen as a hedge against capital-market risks which justifies more risky asset portfolios. We show, however, that this positive relationship between risk taking and retirement exibility is weakened - and under some conditions even turnedaround - if not only capital-market risks but also productivity risks are considered.Productivity risk in combination with a high elasticity of substitution between consumption and leisure creates a positive correlation between asset returns and labour income, reducing the willingness of consumers to bear risk. Moreover, it turns out that general-equilibrium effects can either increase or decrease the equity exposure,depending on the degree of substitutability between consumption and leisure.

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n° 181, June 2011

Competition leverage. How the demand side affects optimal risk adjustment
Michiel Bijlsma, Jan Boone, Gijsbert Zwart

We study optimal risk adjustment in imperfectly competitive health insurance markets when high-risk consumers are less likely to switch insurer than low-risk consumers. First, we find that insurers still have an incentive to select even if risk adjustment perfectly corrects for cost differences among consumers. Consequently, the outcome is not efficient even if cost differences are fully compensated. To achieve first best, risk adjustment should overcompensate for serving high-risk agents to take into account the difference in markups among the two types. Second, the difference in switching behavior creates a trade of between efficiency and consumer welfare. Reducing the difference in risk adjustment subsidies to high and low types increases consumer welfare by leveraging competition from the elastic low-risk market to the less elastic high-risk market. Finally, mandatory pooling can increase consumer surplus even further, at the cost of efficiency.

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n° 180, June 2011

Migrant Women on the Labour Market. On the Role of Home and Host-Country Participation
KOK Suzanne, BOSCH Nicole, DEELEN Anja, EUWALS Rob

The behaviour of migrant women on the labour market is influenced by a variety of factors, among which the culture of the home and host country. Part of the literature investigates the role of home-country culture. This study extends the literature by including a measure for the influence of host-country culture as an additional determinant of the participation of migrant women. The empirical model explains participation from demographics and educational attainment, and uses home- and host-country female participation as proxies for culture.

Evidence on the basis of the Dutch Labour Force Survey 1996 – 2007 suggests that both differences in home-country female participation and the trend in native female participation, as a measure for host-country culture, affect the participation of migrant women. The results suggest that host-country participation is at least as important as home-country participation

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n° 179, May 2011

The decline of early retirement pathways in the Netherlands: An empirical analysis for the health care sector
EUWALS Rob, VAN VUREN Annemiek, VAN VUREN Daniel

Early retirement schemes and disability insurance in the Netherlands have both been reformed during the past decades. The reforms have increased incentives to continue working and have decreased the substitution between early retirement and disability. This study investigates the impact of the reforms on labour market exit probabilities. We use administrative data for workers in the Dutch health care sector between 1999 and 2006. We estimate a multinomial Logit model for transitions out of the labour force. The empirical results suggest that the reforms have been effective, as the labour market participation rate of the elderly has increased. The concept of substitute pathways into retirement seems less relevant today as the results confirm that disability insurance is closed off as an early retirement exit route.

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n° 178, May 2011

External Benefits of Brownfield Redevelopment: An Applied Urban General Equilibrium Analysis
VERMEER Niels, VERMEULEN Wouter

Does brownfield redevelopment warrant government support? We model external benefits of the transformation of an inner city industrial site into a residential area in an urban general equilibrium framework, focussing on the removal of a local nuisance, the exploitation of agglomeration economies and preservation of open space at the urban fringe.

These benefits are compared to the value of transformed land, which accrues to the developer. A numerical application indicates that local nuisance and agglomeration effects may push social returns significantly beyond these private returns. However, depending on the price elasticity of local housing demand, the amount of preserved greenfield land may be small and it only generates additional benefits to the extent that direct land use policies fail to internalize its value as open space.

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n° 177, April 2011

Defined Benefit Pension Schemes: A Welfare Analysis of Risk Sharing and Labour Market Distortions
DRAPER Nick, WESTERHOUT Ed, NIBBELINK Andrä

This CPB Discussion Paper addresses two policy questions with respect to public defined benefit (DB) pension schemes. Firstly, does a funded DB pension scheme increase welfare? Secondly, how large is the commitment problem of pension funds after an adverse capital market shock?

This CPB Discussion Paper addresses two policy questions with respect to public defined benefit (DB) pension schemes: Firstly, does a funded DB pension scheme increase welfare? In other words: do the gains from intergenerational sharing of capital market risks outweigh the labour market distortions from pension schemes? Secondly, how large is the commitment problem of pension funds after an adverse capital market shock?

The answer to the first question depends on the used welfare measure. If we use risk-neutral weights to aggregate the equivalent variations of different generations in different states of nature then a DB pension scheme is welfare increasing. If we use as weights the stochastic discount factors that corresponds to these states of nature, we conclude the opposite: a DB pension scheme reduces welfare. The probability that future households actually experience a welfare gain if the pension scheme is closed can be as large as 38 percent. So, a pure DB pension scheme has a large commitment problem: continuity will become at risk in case participation in the pension scheme is not mandatory. These results are most sensitive for the values of the labour supply elasticity, the risk aversion parameter and the mean and the standard deviation of the excess return on equity.

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n° 176, April 2011

Intergenerational Risk Sharing in Time-Consistent Funded Pension Schemes
WESTERHOUT Ed

Intergenerational risk sharing by funded pension schemes may increase welfare in an ex ante sense. However, it also suffers from a time inconsistency problem. In particular, young generations may be unwilling to start participating in a pension scheme if this requires them to make huge transfers to older generations.

This paper explores if limiting the transfers between generations can make a funded pension scheme time-consistent. The paper finds that this is possible indeed in a more or less realistic economic environment; it is not the case in general however. The form of the time-consistent scheme (how strong are the limits to transfers) is found to be very responsive to the economic environment. The time-consistent scheme offers lower welfare than the original time-inconsistent scheme, but higher welfare than a defined-contribution scheme without any intergenerational risk sharin

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n° 175, March/April 2011

Systemic risk across sectors; Are banks different?
BIJLSMA Michiel, MUNS Sander

This research compares systemic risk in the banking sector, the insurance sector, the construction sector, and the food sector. To measure systemic risk, we use extreme negative returns in stock market data for a time-varying panel of the 20 largest U.S. firms in each sector.

We find that systemic risk is significantly larger in the banking sector relative to the other three sectors. This result is robust to separating out correlations with an economy-wide stock market index. For the non-banking sectors, the ordering from high to low systemic risk is: insurance sector, construction sector, and food sector. The difference between the insurance sector and the construction sector is no longer significant after correcting for correlations with the economy as a whole. The correction has a large effect for the banking sector and the insurance sector, and a smaller effect for the other two sectors.

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n° 174, March 2011

Flexible Retirement
VAN VUUREN  Daniel

Flexible retirement - that is, the opportunity to choose one’s own personal retirement age - serves as a hedge against pension risk and provides insurance to workers facing health or productivity shocks. This paper discusses three conditions to provide insurance through flexible retirement.

Flexible retirement and flexible pension schemes are in practice closely linked because of imperfect capital markets and institutional restrictions.

First, it should be possible to adjust the pension starting date at limited cost. This condition is gradually being fulfilled, as many countries are moving towards more actuarially neutral pension schemes.

Second, individuals should be willing to adjust their labour supply in case of a wealth shock. This condition seems largely fulfilled, although the available empirical evidence suggests that the framing of pension wealth is at least as important as the income effect.

Third, the labour market should be able to deal with flexible individual retirement decisions. This condition is gaining importance, but has not yet received much attention in the literature. Institutions often hamper employment past the ‘standard retirement age’. Moreover, the hiring rates of older workers are low and their unemployment duration is high. Institutional reforms facilitating flexible retirement opportunities are desirable from an insurance perspective.

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n° 173, March 2011

A Taste for Trips out of Town: Urban Sprawl and Access to Open Space
VERMEULEN Wouter, ROUWENDAL Jan

Residential development at the urban fringe raises the cost of trips to open space. We derive a simple expression for the tax that internalizes this effect of sprawl in a monocentric city andapply it using survey data on recreational activity.

Urban sprawl is inefficient if landowners ignore the social value of open space in their decision to develop it. The absence of a market for open space amenities impedes reliable estimation of their value, so policies that control urban growth may be ill-informed (Brueckner, 2000). Our approach to this valuation problem relies on the well-established notion that travel costs of recreational activity serve as an implicit price (Hotelling, 1947; Phaneuf and Smith, 2006). We extend the conventional monocentric city model with a demand for ‘trips out of town’: recreation in large contiguous undeveloped areas like forests, wetlands or the countryside, for which open space within the urban boundary is an imperfect substitute. Urban expansion reduces accessibility of such ‘true open space’ for prior inhabitants. We derive a simple expression for the tax on conversion of agricultural land to urban use that internalizes this effect and apply it to the city of Amsterdam.

The travel cost approach has rarely been applied to the valuation of open space in or near urban areas (McConnell and Walls, 2005). In particular, most applied welfare analyses of open space provision in a general equilibrium framework have been based on capitalization of benefits into local property values. This entails a focus on comparably localized effects.1 Notably, open space amenities in Cheshire and Sheppard (2002) are confined to a surrounding squared kilometre. Walsh (2007) also considers the benefit of proximity to public open space, yet the average distance is only about one kilometre in his empirical application. In large cities, visits to true open space will generally require a much longer trip.

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n° 172, March 2011

Vertical integration and exclusive vertical restraints between insurers and hospitals
DOUVEN Rudy, HALBERSMA Rein, KATONA Katalin, SHESTALOVA Victoria

We examine vertical integration and exclusive vertical restraints in health-care markets where insurers and hospitals bilaterally bargain over contracts. We employ a bargaining model in a concentrated health-care market of two hospitals and two health insurers competing on premiums. Without vertical integration, some bilateral contracts will not be concluded only if hospitals are sufficiently differentiated, whereas with vertical integration we find that a breakdown of a contract will always occur. There may be two reasons for not concluding a contract. First, hospitals may choose to soften competition by contracting only one insurer in the market. Second, insurers and hospitals may choose to increase product differentiation by contracting asymmetric hospital networks. Both types raise total industry profits and lower consumer welfare.

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n° 171, March 2011

Energy Intensity across Sectors and Countries: Empirical Evidence 1980–2005
MULDER Peter, DE GROOT Henri L.F.

This paper presents stylized facts on energy-intensity developments for 19 OECD countries and 51 sectors over the
period 1980−2005. A principal aim of this paper is to introduce and discuss a new database that combines the recently launched „EU KLEMS Growth and Productivity Accounts‟ with physical-energy data from the International Energy Agency (IEA). We do so by means of an empirical analysis consisting of the following components at various levels of sectoral detail. First, we document per country the growth rates of energy use, value added and energy intensity (i.e. the ratio of energy use to value added). Second, we compare levels of energy intensity across countries and analyze the evolution of the observed cross-country differences over time. Third, by means of a decomposition analysis we calculate for each country to what extent aggregate energy-intensity trends can be explained from, respectively, shifts in the underlying sectoral structure and efficiency improvements within individual sectors. Finally, we identify issues and areas of research within the field of energy economics where these data may be applied fruitfully.

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n° 170, March 2011

Lifetime Generational Accounts for the Netherlands
TER RELE Harry, LABANCA Claudio

Conventional Generational Accounting only includes future benefits and burdens from the government. This paper’s contribution is to include past benefits and burdens as well, and in this way to provide a full lifetime account of how much current and future generations benefit from government, in net terms, under various future policy lines. The calculations are carried out for the Netherlands and for the cohorts born as from 1946. The more complete picture may be helpful for political decision making on equitable intergenerational policies. A second contribution of this paper is that it uses a more comprehensive benefit concept than other such studies by including non-cash benefits as well.
The results point out that the lifetime net benefits are positive for almost all of the cohorts considered. Only the very first of the post war cohorts have negative net benefits. Net benefits rise sharply for the younger cohorts, mainly due to increasing benefits from education, health care and general government. They reach a peak for those born between 1960 and 1990. Due to austerity measures that are necessary to restore sustainability of public finances, they decline again for the cohorts after 1990.

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n° 169, February 2011

Broadband Policy in the Light of the Dutch Experience with Telecommunications Liberalization
DE BIJL Paul W.J.

More than a decade has passed since the liberalization of telecommunications in the Netherlands. Nevertheless, the regulator is still mandating access to local access networks, and the incumbent and cable operators have been dragging their feet on upgrading their networks to fiber-based next generation networks. Is the gradual introduction of facilities-based competition, by fine-tuning access regulation, working as intended? What can one learn from the Dutch experience? As scale economies are persistent and broadband networks are becoming an integral part of our critical infrastructures, it is important to reassess the role of the government, on issues ranging from network neutrality to broadband penetration, universal service, and security. The outcome of such an assessment could be incongruent with the blueprint of competition held on to by policymakers and regulators.

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n° 168, February 2011

Knowledge diffusion from FDI and Intellectual Property Rights
SMEETS Rogers, DE VAAL Albert

We study the extent to which a country's strength of Intellectual Property Rights (IPR) protection mediates knowledge spillovers from Foreign Direct Investment (FDI). Following the opposing views in the IPR debate, we propose a negative effect of IPR strength on unintentional horizontal (intra-industry) knowledge diffusion, and a positive effect on intentional vertical (inter-industry) knowledge diffusion. Using a unique firm-level dataset of large, publicly traded firms in 22 (mostly) developed countries, we find partial support for these expectations. Strong IPR indeed reduces horizontal knowledge diffusion, while it stimulates backward (to suppliers) knowledge diffusion. Somewhat unexpectedly however, we also find that forward (to customers) knowledge diffusion decreases with IPR strength. In general, and in line with earlier literature, the results regarding backward knowledge diffusion are most robust to changes in model specification. Our results contribute to the debate regarding the desirability of strengthening national IPR systems, and suggest that local firms might indeed benefit from this through their (backward) linkages with multinationals. Additionally, our results suggest that the moderating effect of IPR strength might partly explain the inconclusive results in the FDI knowledge diffusion literature.

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n° 167, February 2011

Capitalization of Central Government Grants into Local House Prices - Panel Data Evidence from England
HILBER Christian A. L., LYYTIKÄNEN Teemu, VERMEULEN Wouter

We explore the impact of central government grants on local house prices in England using a panel data set of local authorities (LAs) from 2001 to 2008. Electoral targeting of grants to LAs by the incumbent national government provides an exogenous source of variation in grants that we exploit to identify their causal effect on house prices. Our results indicate substantial or even full capitalization. We also find that house prices respond more strongly in locations in which new construction is constrained by physical barriers. Our results imply that (i) during our sample period grants were largely used in a way that is valued by the marginal homebuyer and (ii) increases in grants to a LA may mainly benefit the typically better off property owners (homeowners and absentee landlords) in that LA.

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n° 166, February 2011

Does Manager Turnover Improve Firm Performance? Evidence from Dutch Soccer, 1986-2004
TER WEEL Bas

This research examines the impact of manager turnover on firm performance using information from the Dutch soccer league in the period 1986-2004. The main advantage of using sports data is that both manager characteristics and decisions and firm outcomes are directly observable. Both difference-in-difference and 2SLS estimates suggest no statistically significant improvements in performance after manager turnover, whereas previous research based on publicly traded firm data has found positive but very small effects of manager turnover on performance. The estimates confirm previous research using soccer data. In addition, estimates suggest that manager quality does not seem to matter in predicting turnover. These estimates are compared and contrasted with studies using publicly traded firm data and studies using soccer data.

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