CPB Discussion papers - Antérieurs à 2005
2004
n° 042 - December 2004
Services trade within Canada and the European Union. What do they have in common?
A. Lejour - J.W. de Paiva Verheijden
This paper explains bilateral services trade using a gravity equation and compares the results with trade in goods. We analyse bilateral trade between the provinces of Canada and between the member states of the European Union. We conclude that the gravity equation explains the variability in services trade very well: market size of the exporting and importing regions and distance are the most important explanatory variables. On average, distance is a less hindrance for services trade than for goods trade. Differences in languages and the regulation of product markets hamper services and goods trade in Europe significantly. Trade in services is also hampered by regulation in the importing country, but this is not true for goods. Services trade within Canada is twice as high as within Europe measured as share of GDP. Tentative estimates suggest that intra-EU services trade could be much higher if the internal market would function like the Canadian services market.
(texte intégral du n° 42/2004)
n° 041 - November 2004
Refinement of the partial adjustment model using continuous-time econometricsArie ten Cate
This paper presents some suggestions for the specification of dynamic models. These suggestions are based on the supposed continuous-time nature of most economic processes. In particular, the partial adjustment model -or Koyck lag model- is discussed. The refinement of this model is derived from the continuous-time econometric literature.
We find three alternative formulas for this refinement, depending on the particular econometric literature which is used. Two of these formulas agree with an intuitive example. In passing, it is shown that that the continuous-time models of Sims and Bergstrom are closely related. Also the inverse of Bergstrom’s approximate analog has been introduced, making use of engineering mathematics.
(texte intégral du n° 41/2004)
n° 040 - November 2004
Is the American Model Miss World? Choosing between the Anglo-Saxon model and a European-style alternativeHenri deGroot, Richard Nahuis and Paul Tang
In Lisbon, the European Union has set itself the goal to become the most competitive economy in the world in 2010 without harming social cohesion and the environment. The motivation for introducing this target is the substantially higher GDP per capita of US citizens. The difference in income is mainly a difference in the number of hours worked per employee. In terms of productivity per hour and employment per inhabitant, several European countries score equally well or even better than the United States, while at the same time they outperform the United States with a more equal distribution of income. The European social models are at least as interesting as the US model that is often considered a role model.
In an empirical analysis for OECD countries, we aim to unravel 'the secret of success'. Our regression results show that income redistribution (through a social security system) does not necessarily lead to lower participation and higher unemployment, provided that countries supplement it with active labour market policies. Especially, spending on employment services like job-search assistance and vocational guidance, seems effective. Furthermore, the results suggest that generous unemployment benefits of short duration contribute to employment without widening the income distribution.
(texte intégral du n° 40/2004)
n° 039 - October 2004
Risk adjustment in the Netherlands: An analysis of insurers' health care expendituresRudy Douven
As of 2006, the Dutch healthcare system will be run by regulated competition. An important part of regulated competition is a system of risk adjustment. This paper presents an empirical analysis of the effects of risk adjustment in the Dutch social health insurance system covering the years 1991-2001. By comparing insurers' health care expenditures with their risk adjusted premiums, our analysis estimates the impact of risk adjustment over a number of years. Results indicate that the risk-adjustment system has improved substantially. Whereas in the beginning of the nineties prospective risk adjustment could explain about 20% of the variation in health care expenditure differentials between insurers, this figure rose to 55% in 2001. The explanation of the same variation after retrospective payments did not show a clear upward or downward trend, and has varied since 1995 around 85%. The remaining variation in insurers' health care expenditure differentials are determined more by structural than random factors. One such factor may be related to the low ex-ante projections of the government's total health care expenditures, which favour insurers with a population of relatively good health risks. Results show that new entrants in the Dutch health insurance market had significantly lower health care expenditures. Furthermore, economies of scale do not seem to have played a role during the sample period: the expenditures of large insurers were not significantly lower than those of the smaller insurers.
(texte intégral du n° 39/2004)
n° 038 - August 2004
Auctioning Incentive Contracts: Application to welfare-to-work Programms
Sander Onderstal
This paper applies the theory of auctioning incentive contracts to welfare-to-work programms. In serval countries, the government procures welfare-to-work projects to employment serviceproviders. In doing so, the government trades off adverse selection ( the winning providers is not the most efficient one ) and moral hazard ( the winning providers shirks in his effort to reintegrate unemployed people). We compare three simple auctions with the optimal mechanism and show that two of these auctions approximate the optimal mechanism if the number of providers is large. Using simulations, we observe that competition between three bidders is already sufficent for the outcome of these auctions to reach 95% of the optimal level of social welfare.
(texte intégral du n° 38/2004)
n° 037 - August 2004
Estimating the impact of experience rating on the inflow into disability insurance in the Netherlands
P. Koning
This paper examines the effects of experience rating on the inflow into disability insurance (DI) in the Netherlands, using unique longitudinal administrative data from the Dutch social benefit administration for the years 2000-2002. We follow a difference-in-differences approach to identify the impact of changes in DI premiums. In particular, due to unawareness of the experience rating system, employers seem to have been triggered to increase preventative activities, once they have experienced increases in DI premium ('ex post incentives'). We find the impact of experience rating to be substantial, amounting to a 15% reduction of the inflow into DI. This finding is robust with respect to various alternative specification alternatives. We conclude that the decision of employers to increase preventative activities seems mainly an issue of being aware of the experience rating incentive.
(texte intégral du n° 37/2004)
n° 036 - July 2004
A different approach to WTO negotiations in services
H. Kox - A. Lejour
International negotiations on the liberalisation of service trade are concentrated at non-tariff barriers (NTBs). National government measures form important obstacles for service providers when they want to access foreign markets. International studies predict substantial welfare benefits from removing trade obstacles for services. Negotiations on lowering these obstacles are complicated because government regulations are seldom strictly oriented at keeping foreign firms out their domestic service markets. Some of them (e.g. quantity-based restrictions) are clearly at odds with WTO principles. We argue however that in most cases regulators primarily aimed at correcting domestic market failures with disregard for the potential repercussions for foreign providers of services. In negotiations this problem can be approached by introducing economic necessity tests, but that is a very long and tedious process. We propose a different negotiation approach based on lessons learned from WTO negotiations on agricultural support measures.
(texte intégral du n° 36/2004)
n° 035 - July 2004
Does reducing student support affect educational choices and performance? Evidence from a Dutch reform
M. Belot - E. Canton - D. Webbink
This paper investigates the impact of student support on educational choice (university versus non-university) and student performance in higher education, using data from the Netherlands. Over the years, the generosity of this support system has been substantially reduced. This paper considers the 1996-reform, which reduced the duration of public support by one year and limited it to the nominal duration of the study program. We investigate the effects of the reform, using micro data on freshmen from two cohorts: one before the change (1995) and one after the change (1997). We find that the reform drove 2.2% of the students from university to higher vocational education. We also find that performance improved after the reform. The probability of dropping out after 5 months fell by 2%, and university students completed 5% more courses. In addition, students spent relatively more time working on the side (3.7 hours per week on average) and less time studying (1.8 hours per week on average). This means that students probably became more efficient.
(texte intégral du n° 35/2004)
n° 034 - July 2004
Returns to university education; evidence from an institutional reform
D. Webbink
In 1982, duration of university education in the Netherlands decreased from five to four years. This institutional reform is exploited for estimating the causal effect of one year of university education on wages in 1997. Wages of employees who enrolled just before or after the reform are compared using data from the Dutch Wage Structure Survey of 1997. We find that the fifth year of university education increased wages with 7 to 9 percent. This wage differential is found for employees enrolling four years before or after the reform. Confounding factors like time-effects, typical age-effects or ability-bias do not seem to bias the main results. The findings suggest that there is scope for increasing private contributions of students. Moreover, the reform may have harmed total welfare. Alternative policies of sticking to five-year duration and increasing private contributions for higher education could have given a more favourable outcome.
(texte intégral du n° 34/2004)
n° 033 - July 2004
Do student loans improve accessibility to higher education and student performance? An impact study of the SOFES program in Mexico
Erik Canton, Andreas Blom
Financiële steun aan studenten in het hoger onderwijs kan bijdragen aan de opbouw van menselijk kapitaal via twee kanalen: hogere deelname en verbeterde studieprestaties. We analyseren het kwantitatieve belang van beide kanalen in de context van een studieleningprogramma (SOFES) ingevoerd bij een groep private universiteiten in Mexico. Voor wat betreft het eerste kanaal wijzen uitkomsten van de Mexicaanse huishoudensenquête erop dat financiële steun belangrijk positieve effecten op deelname aan universitair onderwijs heeft. Twee databronnen worden gebruikt om het tweede kanaal, studieprestaties, te onderzoeken. Administratieve data geleverd door SOFES worden geanalyseerd gebruikmakend van de Regression Discontinuity (RD) methode, en enquêtedata stellen ons in staat om een vergelijkbare analyse met een anders samengestelde controlegroep uit te voeren. De empirische resultaten op basis van de enquêtedata suggereren dat studenten met een SOFES-lening (i) betere studieprestaties laten zien, en (ii) vaker een bijbaantje hebben dan studenten zonder SOFES-krediet.
(texte intégral du n° 33/2004)
n° 032 - June 2004
A leading indicator for the Dutch economy;
methodological and empirical revision of the CPB system
H. Kranendonk - J. Bonenkamp - J. Verbruggen
Since 1990, CPB Netherlands Bureau for Economic Policy Analysis (CPB) has used a leading indicator in preparing short-term forecasts for the Dutch economy. This paper describes some recent methodological innovations as well as the current structure and empirical results of the revised CPB leading indicator. Special attention has been paid to the role and significance of IFO data. The structure of the CPB leading indicator is tailored to its use as a supplement to model-based projections, and thus has a unique character in several respects. The system of the CPB leading indicator is composed of ten separate composite indicators, seven for expenditure categories (‘demand’) and three for the main production sectors (‘supply’). This system approach has important advantages over the usual structure, in which the basis series are directly linked to a single reference series. The revised system, which uses 25 different basic series, performs quite well in describing the economic cycle of the GDP, in indicating the upturns and downturns, and in telling the story behind the business cycle.
(texte intégral du n° 32/2004)
n° 031 - Avril 2004
Explaining the growth of part-time employment; factors of supply and demand
R.W. Euwals - M. Hogerbrugge
Using the Dutch Labour Force Survey 1991-2001, the authors investigate the incidence of part-time employment in the country with the highest part-time employment rate of the OECD countries. Women fulfil most part-time jobs, but nevertheless a considerable fraction of men works part-time as well. Evidence from descriptive statistics and a macro-econometric model at the sectoral level of industry suggests that the growth of part-time employment in the 1990s relates strongly to the growth in female labour force participation. Factors of labour demand, like the shift from manufacturing to services, turn out to play a significant role as well.
(texte intégral du n° 31/2004)
n° 030 - Avril 2004
Pharmaceutical Promotion and GP Prescription Behaviour
F. Windmeijer, E. de Laat, R. Douven, E. Mot
The aim of this paper is to empirically analyse the responses by general practitioners to promotional activities for pharmaceuticals by pharmaceutical companies. Promotion can be beneficial for society as a means of providing information, but it can also be harmful in the sense that it lowers price sensitivity of doctors and it merely is a means of establishing market share, even when cheaper, therapeutically equivalent drugs are available. A model is estimated that includes interactions of promotion expenditures and prices and that explicitly exploits the panel structure of the data, allowing for drug specific effects and dynamic adjustments, or habit persistence. The data used are aggregate monthly GP prescriptions per drug together with monthly outlays on drug promotion for the period 1994-1999 for 11 therapeutic markets, covering more than half of the total prescription drug market in the Netherlands. Identification of price effects is obtained by the introduction of the Pharmaceutical Prices Act, which established that Dutch drugs prices became a weighted average of the prices in surrounding countries after June 1996. We conclude that, on average, GP drug price sensitivity is small, but adversely affected by promotion.
(texte intégral du n° 30/2004)
n° 029 - Mars 2004
An efficient method for detecting redundant feedback vertices
B. Hasselman
A feedback vertex set of a directed graph cuts all cycles in a directed graph. Such a set can be obtained with the Levy–Low contraction algorithm, which generates a small feedback vertex set but not always a minimum size feedback set since it sometimes needs a heuristic contraction rule in order to reduce a graph completely. This may lead to members in a feedback vertex set being redundant in the sense that they do not cut a cycle of the original directed graph. In this paper we develop two algorithms for detecting such redundant feedback vertices efficiently. The algorithms are applied to analysing large nonlinear normalised systems of equations and to the feedback sets of a series of random directed graphs used by other authors. Computational experiments show that the algorithms developed in this paper significantly improve on the brute force algorithm.
(texte intégral du n° 29/2004)
n° 028 - March 2004
Wage moderation and labour productivity
F. Huizinga, P. Broer
In the Dutch economic policy debate, wage moderation is widely considered as a key factor for achieving economic growth and low unemployment. However, some economists criticise the policy emphasis on wage moderation, claiming that high wages are needed to maintain structural labour productivity growth. This paper analyses the effects of a wage push on labour productivity within the framework of endogenous technological progress, endogenous technology adoption and insufficient competition. The conclusion is that a wage push raises labour productivity in the short run. However, this rise in labour productivity is temporary and inefficient. In the long run, a wage push may well harm labour productivity. The main message of the paper is that it is probably best not to use wage policy at all as a tool to influence productivity. As a tool against unemployment, however, it is very effective. These insights are applied in a review of the Dutch post-war productivity growth.
(texte intégral du n° 28/2004)
2003
n° 027 - November 2003
How econometric models help policy makers; theory and practice
H. Don
Frisch and Tinbergen founded the standard framework for finding the optimal economic policy by maximizing the welfare function under constraints supplied by the econometric model. Frisch worried about the reliability of the model and Tinbergen thought that it would be too difficult to specify the welfare function. Looking at current practice in Dutch policy making, both worries are relevant but the solutions proposed by the founders are not very helpful. Rather, the solution is found in applying an iterative trial-and-error procedure interfacing
between the policy maker and the model-cum-expert system. The main contributions of the standard framework are its useful set of concepts, the famous order condition for a feasible solution, and the clear definition of role models for the two parties in the interaction.
(texte intégral du n° 27/2003)
n° 026 - November 2003
Do ICT spillovers matter? Evidence from Dutch firm-level data
George van Leeuwen and Henry van der Wiel
This paper presents an empirical analysis of the contribution of Information Communication and Technology (ICT) to labour productivity growth in the 1990s, using an extensive panel of firm-level data for Dutch market services. We estimate enhanced production function models that include ICT spillovers as well as innovation as a component of TFP (growth). Additionally, we compare the results of this approach with the growth-accounting approach carried out at the firm level. Doing so, we attempt to reconcile the different pieces of empirical evidence regarding the contribution of ICT to productivity growth reported in the literature so far. It is shown that, after accounting for ICT spillovers, the relatively high estimated elasticities of own ICT capital at the firm level are substantially reduced. So, they are more consistent with findings for aggregated levels reported in growth-accounting studies. Nevertheless, the latter studies do not disentangle the causes of TFP-growth into ultimate causes like productivity growth arising from ICT spillovers. Our results underline that the contribution of those spillovers in the years of the ICT boom was probably more substantial than the contribution of ICT capital deepening.
(texte intégral du n° 26/2003)
n° 025 - November 2003
JACOBS B. - The lost race between schooling and technology
We study the evolution of wage inequality between skilled and unskilled workers in the Netherlands for the years 1969-2020. Our analysis is based on estimates of the production structure in the Netherlands, projections of the relative supply of skilled workers, and projections regarding shifts in relative demand for skilled workers. Wage inequality will increase under plausible assumptions because relative demand for skilled workers will increase more rapidly than the relative supply of skilled workers. We study the potential of education subsidies to higher education in order to stimulate the supply of skilled workers thereby off-setting the projected increase in wage inequality. Our findings suggest that education subsidies are not very effective in combating increases in wage inequality.
(texte intégral du n° 25/2003)
n° 024 - November 2003
HOEN Alex, MULDER Machiel - Explaining Dutch emissions of CO2; a decomposition analysis
Decomposition of CO2 data of the Netherlands shows that much progress has been made with reduction of CO2 emissions by changing to less CO2 intensive technologies. Demand also shifted to more products that are produced with less CO2 emission. Further, shifts in the inputs needed in the production process also managed to decrease the CO2 emissions.m These effects, however, were more than compensated by increased CO2 emission due to economic growth. Especially growth in exports led to substantial more CO2 emissions.
Consequently, emissions of CO2 remain a persistent environmental problem in spite of large improvements in the field of energy efficiency and carbon content of energy use. Policy measures affecting marginal costs of 'dirty' products, like an international system of emissions trading, could affect the demand for these products, and hence decrease emissions efficiently. A different policy may affect the Dutch competitive position, since the emission of CO2 is closely related to exports. In any way, action needs to be taken since the analysis suggests that otherwise the aims of the Kyoto-protocol may not be reached.
(texte intégral du n° 24/2003)
n° 023 - November 2003
MULDER Peter, DE GROOT Henri L.F. - Sectoral Energy- and Labour-Productivity Convergence
This paper provides an empirical analysis of convergence patterns for energy- and labour-productivity developments at a detailed sectoral level for 14 OECD countries, covering the period 1970-1997. Cross-country differences of energy-productivity levels are shown to be substantially larger than cross-country differences of labour-productivity levels at all levels of sectoral aggregation. A s-convergence analysis shows that the development of cross-country variation in productivity performance depends on the level of aggregation. Both patterns of international productivity convergence and divergence exist across sectors.
Using a panel-data approach, we find in most sectors energy productivity to grow relatively fast in countries with relatively low initial productivity levels, while in several sectors this is also true for labour productivity. This evidence of ß-convergence supports the hypothesis that lagging countries tend to catch up with technological leaders, in particular in terms of energy productivity.
Moreover, the results show that convergence is conditional rather than unconditional, meaning that productivity levels converge to country-specific steady states. Searching for the fundamentals determining cross-country productivity differentials reveals a positive productivity effect of energy prices and economies of scale in several sectors, while wages, investment share, openness and specialisation play only a very limited role in explaining (cross-country differences in) energy- and labour-productivity growth.
(texte intégral du n° 23/2003)
n° 022 - November 2003
MULDER Peter, DE GROOT Henri L.F. - International comparison of sectoral energy- and labour-productivity performance. Stylised facts and decomposition of trends
This paper simultaneously explores trends in energy- and labour productivity for 14 OECD countries and 13 sectors over the period 1970-1997. A principal aim of this paper is to trace back macroeconomic productivity developments to developments at the level of individual sectors, in order to correct trends in technology-driven productivity improvements for the impact of structural effects.
First, we document trends in macroeconomic energy- and labour productivity performance, examining the role of the Manufacturing, Services, Transport and Agricultural sector.
Second, we take a closer look at the role of 10 Manufacturing sectors in driving aggregate Manufacturing energy- and labour-productivity performance. A cross-country decomposition analysis reveals that in some countries structural changes contributed considerably to aggregate energy-productivity growth while in other countries they partly offset energy-efficiency improvements. In contrast, structural changes only play a minor role in explaining aggregate labour-productivity developments. We identify for each country the percentage contribution of each sector to aggregate structural and efficiency changes.
Furthermore, we find labour productivity growth to be higher on average than energy productivity growth. Over time, this bias towards labour productivity growth is increasing in the Transport, Agriculture and aggregate Manufacturing sectors, while it is decreasing in Services and most Manufacturing sectors.
(texte intégral du n° 22/2003)
n° 021 - September 2003
VAN LEUVENSTEIJN M., HASSINK W. - Price-setting and price dispersion in the Dutch mortgage market
We analyse empirically price-setting in the Dutch mortgage market, using information on about 124,000 Dutch households and 54 mortgage lenders over the years 1996-2001. For a narrowly defined set of mortgages (which have a fixed lending rate for ten years), the range of the lending rate between lenders varies between 0.86 and 1.24 percentage points over these years. Prices remain dispersed across lenders, even after controlling for the characteristics of the household and the municipality (1 percentage point). This may imply that there is imperfect competition among lenders, so that some of them can develop market power. Furthermore, we find that lenders with lower costs have lower lending rates, accounting for a maximum change of the lending rate by 0.076 - 0.16 percentage point. Finally, we find that the price dispersion of mortgages sold by banks is smaller than that of mortgages sold by life insurers (0.60 versus 1.28 percentage points). This difference may be due to lower agency costs for banks than for life insurers. Another likely explanation is that the market segment for banks is more transparent than that of insurance companies.
(texte intégral du n° 21/2003)
n° 020 - July 2003
NAHUIS Richard, DE GROOT Henri L.F. - Rising Skill Premia
Increases in inequality between low and high-skilled workers are likely to affect welfare state policies in upcoming decades. Demand for resistribution puts pressure on marginal income-tax rates and other social security measures. We come to this conclusion by confronting expected supply and demand for skill. If demand for skill continues to increase at the pace of the last decades, supply has to keep up its high rate of growth of the last decades too. A priori, the former is plausible, the latter is not. This paper makes this point and sketches the major uncertainties surrounding the underlying trends.
(texte intégral du n° 20/2003)
n° 019 - June 2003
VAN DER HORST A. - Structural estimates of equilibrium unemployment in six OECD economies
In Europe, neither unemployment rates nor institutions are uniform. In the EMU, countries have coordinated their monetary policy, and fiscal policy might follow. Does convergence in fiscal policy imply that unemployment rates will converge, too, or is diversified fiscal policy desirable? An answer to this question requires insight into the dependence on fiscal policy of the unemployment rate in equilibrium. This study estimates the equilibrium rate of unemployment and shows that it has been affected significantly by taxes and benefits. Uniform fiscal policy would not, however, harmonise the unemployment rates because the impact of policy varies widely across the OECD economies.
(texte intégral du n° 19/2003)
n° 018 - May 2003
VAN LEUVENSTEIJN M., VAN OMMEREN J. - New evidence of the effect of transaction costs on residential mobility.
Transaction costs have attracted considerable attention in the theoretical literature on residential mobility. In many European countries, these costs mainly consist of ad-valorem transaction costs. In the current paper, we demonstrate empirically for the Netherlands that the transaction costs have a strong negative effect on the owners' probability of moving. Under a range of different specifications, it appears that a one percent-point increase in the value of transaction costs - as a percentage of the value of the residence - decreases ownership to ownership residential mobility rates by eight percent. Our estimates are consistent with the observation that in the Netherlands ad-valorem transaction costs mainly consist of buyer transaction costs.
(texte intégral du n° 18/2003)
n° 017 - March 2003
BORGHIJS A., EDERVEEN J.P., DE MOOIJ R.A. - European wage coordination; nightmare or dream to come true? An economic analysis of wage bargaining institutions in the EU.
This paper analyses recent trends in wage bargaining institutions in Europe to explain the gradual deterioration in the bargaining position of trade unions. It appears that the integration of European economies is an important factor. This raises the question whether trade unions will respond by coordinating their wages internationally. Our conjecture is that the opportunities for wage coordination are not very strong. This is because of the numerous obstacles associated with heterogenous structures in wage setting in the EU. Softer coordination, e.g. in the form of information exchange or agreements on common rules in wage setting, is more likely to occur and has already been introduced in some cases.
If stronger forms of international wage coordination would take off, perhaps in the longer term, this would strengthen the bargaining power of trade unions relative to firms. The implications for equilibrium unemployment are ambiguous. On the one hand, higher bargaining power raises wages and thereby unemployment. On the other hand, it reduces unemployment by better incorporating the response of the ECB to wage demands. Another consequence of stronger forms of international wage coordination may be that the absorption of asymmetric shocks in the EMU gets more problematic. In that case, wage coordination may turn into a nightmare as it hampers a crucial stabilisation mechanism in the EMU.
(texte intégral du n° 17/2003)
2002
n° 016 - December 2002
LIJESEN M.G. - End user prices in liberalised energy markets.
As European energy markets move towards deregulation, energy prices shift from classic ‘cost plus' prices towards market prices. We develop a model for the retail and wholesale energy markets in Europe, based on Bertrand competition in a two part pricing structure with switching costs. We use the model to forecast end user electricity and natural gas prices and find that the introduction of competition in energy retail and wholesale markets will decrease standing charges, lowering total costs for energy users. A larger number of entrants, a cost advantage for one of the suppliers, or lower switching costs reduces standing charges further.
(texte intégral du n° 16/2002)
n° 015 - November 2002
EDERVEEN S., GORTER J. - Does European cohesion policy reduce regional disparities? An empirical analysis
Summary
European cohesion policy entails predominantly the funding of infrastructure and employment projects in lagging regions of EU Member States. It involves the distribution of more than 35 billion euro annually, making it the second most important EU policy in budgetary terms. Its main aim is to reduce regional disparities in regional welfare.
This paper investigates to what extent European cohesion policy achieves this aim. The data reveal poorer regions do tend to receive more cohesion support. The policy thus satisfies a necessary condition for its effectiveness. It remains, however, unclear whether cohesion support significantly increases economic growth. In particular, the more independent convergence one presupposes, the less well cohesion support appears to work. This points at a clear trade-off: either one accepts that regional disparities are here to stay, or one concludes that cohesion policy fails.
(texte intégral du n° 15/2002)
n° 014 - September 2002
NAHUIS Richard - One size fits all? Accession to the internal market; an industry level assessment of EU enlargement
Summary
Enlargement of the EU with ten Central and Eastern European Countries is a major item on the EU's policy agenda. Assessing the economic consequences of the accession to the internal market is not obvious. This paper provides a new method to quantify the impact of the accession. The assessment is based on a gravity-equation, estimated for 16 industries. The estimations exploit the fact that the current EU members already operate in a Single Market since 1992. The estimations provide information on the barriers, at the level of industries, that the Single Market program succeeded to remove. This is used to assess the industry-level impact of enlargement, for the current EU members and for the accession countries.
This approach yields different estimates for the impact of accession to the internal market for the different industries and different countries. The impact of accession to the internal market is notably large in Agriculture, Textiles, Trade Services, Transport Equipment, Non-metallic Minerals and Food Processing. Moreover, the aggregate excess trade within the internal market is comparable to what other studies find. The shock of accession to the internal market is plausibly largest for the accession countries. For the current members of the EU the upcoming enlargement likely has the largest impact for Austria, Greece and Germany.
(texte intégral du n° 14/2002)
n° 013 - September 2002
MENDYS-KAMPHORST Ewa - Open vs. closed: some consequences of the open source movement for software markets
Summary
Open source movement has received more and more attention in the recent years. However, there are not many studies which analyse its economic impact in software markets.
This paper gives a description of the open source phenomenon and attempts to analyse its impact on competition. The focus is on consequences for entry. The comparison of open source projects with proprietary firms turns out to be difficult because of a different nature of incentives which motivate both types of developers. It is therefore difficult to describe the general impact of open source. Nonetheless, one can try to classify open source programs according to their expected effects.
The analysis is illustrated with examples, with a particular emphasis on the competition between Microsoft Windows and GNU/Linus operating system.
(texte intégral du n° 13/2002)
n° 012 - August 2002
CANTON Erik, DE JONG Frank - The demand for higher education in the Netherlands 1950-'99.
Summary
This paper investigates the role of economic factors in the university enrollment decision for the post-war period in the Netherlands. We include those factors standing at the heart of the idea that education is an investment. Collecting student enrollment data for eight subject categories results in a large data set, as a cross-section dimension is added to the time-series. The econometric results suggest that students are not responsive to tuition fees, but financial support (the sum of loans and grants), the college premium on future labour market earnings, and the alternative wage are important in the enrollment decision.
(texte intégral du n° 12/2002)
n° 011 - August 2002
KOK Michiel, NAHUIS Richard, DE VAAL Albert - On labour standards and free trade
Summary
The authors investigate the effectiveness and efficiency of alternative measures to increase standards in low-income countries in a two-country framework where (a) trade and standards in low-income countries are negatively related, and (b) free trade is no longer optimal for the high-income country due to a negative psychological externality that low standards in low-income countries exert. We find that any uncoordinated, unilateral action by the high-income country to decrease the psychological externality is dominated by coordinated action; both with respect to the psychological externality as with respect to the welfare consequences for both countries. Since any increase in the standard in the low-income country decreases their welfare, co-ordination is not always a feasible solution. Only when incorporated in the framework of the WTO, co-ordination can be made incentive compatible and gives rise to a situation where free trade again works to the advantage of both countries.
(texte intégral du n° 11/2002)
n° 010 - August 2002
EDERVEEN Sjef, DE GROOT Henri L.F. , NAHUIS Richard - Fertile soil for structural funds? A panel data analysis of the conditional effectiveness of European cohesion policy
Summary
Structural funds are the most intensively used policy instrument by the European Union to promote economic growth in its member states and to speed up the process of convergence. This paper empirically explores the effectiveness of European Structural Funds by means of a panel data analysis for 13 countries in the European Union. We show that - on average - Structural Funds are ineffective. For countries with the ‘right' institutions, however, Structural Funds are effective. The latter result is obtained for a wide range of conditioning variables, such as openness, institutional quality, corruption and indicators for good governance.
(texte intégral du n° 10/2002)
n° 009 - July 2002
JACOBS B. - An investigation of education finance reform; graduate taxes and income contingent loans in the Netherlands
Summary
In this paper we analyse the consequences of replacing government subsidies with a graduate tax (GT) or income contingent loan (ICL) system for the financing of higher education. Both these systems are directed towards solving capital and insurance market failures.
We constructed an empirically based simulation model to analyse loans, GT's and ICL systems of education finance. We considered various financing regimes that differ in: i) the extent to which non-repayment or default risks are pooled or shifted towards society; and ii) the level of education subsidies.
We show that the switch to a GT or ICL system can significantly reduce the income risks that graduates would experience under an artificially constructed loan system. A reduction in government outlays of about 2.5 billion euro would result if education subsidies are dropped to zero. The tax rate in a GT would then have to be about 6% on average. In an ICL system with full risk pooling the repayment rate would be higher, ranging from 10% - 6%, depending on the size of the default/solidarity premium on the interest rate. If default risks are shifted to society the repayment rate may be lower, but this goes at a cost of a smaller reduction in government outlays. Under a risk-shifting regime, the government encounters diminishing savings on outlays because reducing ex ante subsidies on education subsidies, increases the costs of default (ex post subsidies). Replacing ex ante subsidies with ex post subsidies makes the resulting distribution of incomes more equal because only those with low life-time incomes benefit from ex post subsidies. We discuss behavioural responses and policy implications.
n° 008 - July 2002
NAHUIS R., TANG P.J.G. - Strategic competition with public infrastructure; ineffective and unwelcome?
Summary
Countries invest in international infrastructure in an effort to attract firms. Acquiring the position of a hub would make this effort successful. We use a model of international trade with monopolistic competition, increasing returns to scale and transport costs to analyse policy competition through infrastructure investment.
For a small or backward country the strategic effect of attracting firms is less important than for large or advanced countries. A country that acquires a hub-position sees its welfare improve. The other countries may gain or lose; they benefit from cheaper international trade, but suffer from the relocation of firms. In the case of line infrastructure the spoke countries will invest to eradicate the hub position, whereas in the case of point infrastructure they will not. Policy competition is more likely to deliver too much infrastructure investment when transport costs are low and the strategic effect is more important. A globalising world may thus call for international co-ordination.
n° 007 - July 2002
FIDRMUC J. - Migration and regional adjustment to asymmetric shocks in transition economies
Summary
Does migration facilitate regional adjustment to idiosyncratic shocks? The evidence from post-communist economies indicates that the efficacy of migration in reducing inter-regional unemployment and wage differentials has in fact been rather low. High wages appear to encourage, and, similarly, high unemployment tends to discourage, overall migration - inbound and outbound - rather than induce a net flow from depressed regions to those with better economic conditions. Even when the impact of unemployment and wages on net migration is statistically significant, it is economically very small. Finally, migration flows have actually been declining in the course of transition, even as inter-regional disparities have been rising.
n° 006 - June 2002
FOLMER K., WESTERHOUT E. - Financing medical specialist services in the Netherlands: welfare implications of imperfect agency
Summary
From 1995 onward the financing scheme for specialist care in the Netherlands has moved from a fee-for-service scheme to a lump-sum budget scheme. This paper analyses the economic and welfare effects of this policy change. The paper adopts a model that integrates demand and supply considerations and recognizes the potential roles of moral hazard and supplier-induced demand. The model is fully numerical, being estimated and calibrated upon data for the Dutch health care sector. The paper finds that the shift in financing regime has been welfare-reducing. The policy change induced medical specialists to lower the supply of health services which was already too low from a welfare point of view. This conclusion is robust to significant changes in major parameter values.
n° 005 - February 2002
DIAW K.M., GORTER J. - The remedy may be worse than the disease: a critical account of The Code of Conduct
Summary
The Code of Conduct for business taxation may, diametrically opposed to its intention, aggravate tax competition between EU Member States. The reason is that it induces, by restricting harmful tax practices, cuts in generic tax rates that may reduce tax revenue even further. If one presupposes a benevolent utility maximising government, then this worsens the underprovision of public goods. We show within a standard tax competition framework that this scenario is more likely to unfold with a higher upper bound for nondistortionary taxes, a higher responsiveness of mobile capital to tax rate differentials, and a smaller endowment of internationally mobile capital.
n° 004 - January 2002
NAHUIS Richard, PARIKH Ashok - Factor mobility and Regional Disparities: East, West, Home's Best?
Summary
Unemployment rates as well as incomes per capita differ vastly across the regions of Europe. Labour mobility can play a role in resolving regional disparities. This paper focuses on the questions why labour mobility is low in the EU and how it is possible that it remains low. We explore whether changes in labour participation act as an important alternative adjustment mechanism. We answer this question in the affirmative. Furthermore, we argue that labour participation of young females is very important in adjusting to regional disparities. Finally, we examine whether part time work is an adjustment mechanism that is comparable to labour force participation. It turns out not to be.
2001
n° 003 - November 2001
DE MOOIJ Ruud A., EDERVEEN Sjef - Taxation and foreign direct investment. A synthesis of empirical research
Summary
This paper reviews the empirical literature on the impact of company taxes on the allocation of foreign direct investment. We make the outcomes of 25 empirical studies comparable by computing the tax rate elasticity under a uniform definition. The mean value of the tax rate elasticity in the literature is around 3.3, i.e. a 1%-point reduction in the host-country tax rate raises foreign direct investment in that country by 3.3%. There exists substantial variation across studies, however. By performing a meta analysis, the paper aims to explain this variation by the differences in characteristics of the underlying studies. Systematic differences between studies are found with respect to the type of foreign capital data used, and the type of tax rates adopted. We find no systematic differences in the responsiveness of investors from tax credit countries and tax exemption countries.
n° 002 - September 2001
RELE H. ter, VAN STEEN G. van - Housing subsidisation in the Netherlands: measuring its distortionary and distributional effects, 2001
Summary
This paper measures the distortionary and distributional effects of housing subsidies. The results are discussed in the light of the main justifications for subsidising housing, i.e. the merit-good argument, external effects and the distribution motive. Our measurements reveal some patterns of subsidisation that seem difficult to justify on these grounds. This applies especially to the differences between subsidisation of rental and owner-occupied housing, the differences between mortgage- and equity-financed ownership and the increase of relative subsidisation above a certain income level.
n° 001 - June 2001
DE GROOT H.L.F. - On the Optimal Timing of Reductions of CO2 Emissions: An economists' perspective on the debate on 'when flexibility'
Summary
Reducing the emission of greenhouse gases to reduce climate change is high on the policy agenda. Discounted costs of reduction are estimated to be substantial. They depend on the employment of various flexibility mechanisms that affect these costs. One of these flexibility mechanisms is the so-called when-flexibility stressing the timing of policy measures aimed at reducing CO2-emissions. This paper surveys the arguments in favour of early and late reduction. By means of an illustration of some of the key-mechanisms, we discuss an applied analysis of optimal timing performed with the applied general equilibrium model DICE.
2000
n° 174 (december 2000)
HAKFOORT J.R., WEIGAND J.C. - Commercial Publishing - A quiet life?
Market power and performance on the Dutch market for consumer magazines
Summary
The study analyses the Dutch market for consumer magazines. Magazines share a number of characteristics with other information goods: they are experience goods, non-rival, have high fixed and low marginal cost, and content can be subsidised or sponsored by advertising. We develop a simple theoretical model to show that, if readers value content, it is profit maximising for publishers to use pricing power in the advertising market to subsidise the price charged from readers. The empirical analysis is based on a panel data set of 71 Dutch magazines over the period 1990 - 1998. The regression results suggest that magazines with a higher circulation are indeed sold at lower newsstand prices, while ad rates tend to be higher for these magazines. The analysis of the market indicates that policy makers should be on the look-out for anti-competitive actions taking place in upstream or downstream markets.
n° 173 (december 2000)
LEUVENSTEIJN, Michiel M. van, KONING Pierre - The effects of home-ownership on labour mobility in the Netherlands: Oswald's theses revisited
Summary
This paper examines the hypotheses presented by Oswald (1999) for the Netherlands. These are: I) Home-owners are less likely to move than renters, II) Unemployed home-owners are less likely to move than unemployed renters, III) Owners of houses are less likely to move to another job, because they are not willing to leave the region and IV) Owners of houses are more likely to become unemployed. Using individual data of a panel of labour market and housing market histories for the period 1989-1998, we estimate a hazard rate models, that explain transitions on these markets. We find evidence for the Oswald theory in two cases: employed home-owners are less likely to move than renters are, and employed home-owners are less likely to change jobs than renters are. However, from this alone we cannot conclude that employed workers that own a house have worse labour market positions than renters. Instead, their commitment to jobs makes them less vulnerable for unemployment. Also, Oswald's theory does not seem to hold for unemployed workers or nonparticipants. Instead, unemployed home-owners are even more inclined to move than renters.
n° 172 (novembre 2000)
GORTER Joeri and PARIKH Ashok - How mobile is capital within the European Union?
Summary
The key result of the tax competition literature is that governments set inefficiently low tax rates onincome from internationally mobile production factors. Therefore, there is a case for coordination of EU capital income taxes, provided that capital is mobile within the EU. We measure how the international allocation of capital depends on taxation by examining the relation between FDI positions and effective corporate income tax rates. An EU country typically increases its FDI position in another EU country by approximately four percent if the latter decreases its effective corporate income tax rate by one percentage point relative to the EU mean. This conditionally support the recent efforts of the EU to coordinate capital income taxation. The benefits or costs of tax coordination ultimately depend, however, on whether one views the government as a social welfare maximising agent or tax revenue maximising leviathan.
n° 171 (novembre 2000)
DOUVEN Rudy - Regulated Competition in Health Insurance Markets
Summary
The efficient delivery of medical services may be pursued by intensifying competition among health care insurers. This paper develops a model of regulated competition among health care insurers. It shows that increasing competition may foster efficiency-raising activities, reduce insurer profits and lower health care costs. However, it may also increase the variability of consumer premiums and increase risk-type specific selection activities by insurers as the government will generally lack information on the risk characteristics of the insured.
n° 170 (septembre 2000)
EWIJK Casper van, TANG Paul J.G. - Efficient progressive taxes and education subsidies
Summary
Progressive income taxes moderate wage demands by trade unions and thereby reduce unemployment, but also they reduce incentives to acquire skills and lower productivity of workers. The optimal response of the government to this dilemma is to choose a system of progressive taxes and to (partly) subsidise investment in human capital.
A combination of generous education subsidies and steep tax rates is more likely to prevail the larger the power of trade unions to set wages, the better the ability of the government to steer private efforts to educate, and the higher the preference for equality between the employed and the unemployed.
An empirical analysis for several OECD countries gives similar results. A policy mix of high education subsidies and relatively progressive income taxes is found in countries where union membership is significant and the replacement rate is high.
n° 169 (août 2000)
NAHUIS Richard - The Skill Premium, Technological Change and Appropriability
Summary
In the US the skill premium and the non-production/production wage differential increased strongly from the late 1970s onwards. Skill-biassed technological change is now generally seen as the dominant explanation, which calls for theories to explain the bias. This paper shows that the increased supply of skill - which is usually seen as countervailing the rise in skill premiums – can actually cause rising skill premiums. The analysis starts from an R&D-driven endogenous growth model. Our key assumption is that skilled labour is employed in non-production activities that both generate and use knowledge inputs. If firms can sufficiently appropriate the intertemporal returns from these activities, that is, knowledge that is accumulated is sufficiently tacit, skill premiums may rise with the supply of skilled labour. The degree of appropriability is endogenous, which means that firms can choose to accumulate tacit versus codified knowledge. We show that the degree of appropriability rises with the supply of skills. As a result, the skill premium first falls and then increases when skilled labour supply rises. Simultaneously, patents per dollar spent on R&D fall.
n° 168 (juillet 2000)
LEJOUR A., NAHUIS R. - Openness, growth and R&D-spillovers: uncovering the missing link?
Summary
Research and development (R&D) raises not only the own technology levels, but also that in other sectors and abroad. We examine the trade-related diffusion of R&D in three steps.
First, using OECD and UNESCO data we provide an overview of global R&D expenditures. Second, we estimate the relation between sectoral R&D expenditures and growth. Finally, these R&D linkages are incorporated in WorldScan: a dynamic applied general equilibrium model for the world economy.
We simulate trade liberalisation and analyse the effects on GDP in different regions. We find that the GDP effects of trade liberalisation are magnified considerably for some regions, notably Japan and South-East Asia, where for others, for example China and Sub-Saharan Africa, the GDP effects are not blown up at all. These findings can be traced back to changing specialization patterns and changing import patterns. A region either specialises in R&D-intensive sectors or imports R&D-intensive goods. Some regions import the knowledge-intensive goods from knowledge-poor regions. Such a 'double unfortunate' trade and production pattern explains the results for Sub-Saharan Africa and China.
n° 167 (juin 2000)
LEJOUR A.M., TANG P.J.G. - The differential impact of the South on wage inequality in the North
Summary:
This paper explores the potential future impact of globalisation on relative wages, using WorldScan. The focus is on wage inequality in Japan, Western Europe and the United States. Inequality rises for several reasons: barriers to trade fall, and in developing countries demand patterns change and at the same time workers shift from traditional low-productivity toward modern high-productivity activities. Even though inequality does not rise dramatically, one should not ignore the characteristics of the growth process in developing countries: trade liberalisation is not only reason behind growing inequality.
Another interesting result is the different impact on industrialised countries. Simulations show that the United States is least sensitive to falling trade barriers and changes in developing countries. The impact on Japan and Western Europe is larger.
n°166 (juin 2000)
JONGEN E.L.W., VAN GAMEREN E., GRAAFLAND J.J. - The impact of active labour market policies; an AGE analysis for the Netherlands
Summary:
In this publication we study the impact of active labour market policies (ALMPs) in the context of an applied general equilibrium model for the Dutch labour market. By using a calibrated general equilibrium model we try to narrow down the possible range of the net effect of various ALMPs. We consider the impact of publicly provided relief and training programs and subsidies in the private sector for low-productive workers (vouchers) on the steady state of the labour market (the 'long-run'). Our findings are:
Relief jobs reduce unemployment and increase production in the public sector. However, higher wage and search costs crowd out private sector employment and production. Overall production falls.
Training programs reduce unemployment more than relief jobs. Individuals that participate in training programs (re-)gain (lost) skills. In this way training programs speed up the process by which workers move into private sector employment. Search costs for firms fall. However, additional wage pressure leaves a negative net effect on private sector employment. Production is hardly affected though, due to the training effect on average labour productivity.
Vouchers for low-productive workers reduce labour costs and hence increase private sector employment and production. Unemployment falls by less than under the relief and training programs.
All programs lead to a rise in the budget deficit, especially the relief and training program. The voucher program is less expensive, as there are substantial savings on transfers, whereas the tax base rises. We further report some sensitivity analyses on assumptions for which we have a weak empirical basis. The numerical outcomes are quite sensitive to some parameters in the wage-bargaining model and the effect of training on an individual's productivity level. However, qualitatively the results are unaffected.
n° 165 (juin 2000)
MANNAERTS Hein – STREAM Substance Throughput Related to Economic Activity Model. A partial equilibrium model for material flows in the economy
Summary:
This paper presents STREAM, a partial equilibrium model for seven bulk materials: steel, aluminium, plastic, paper, nitrogen, phosphate and potassium. The model describes the dynamic relations between physical and monetary flows in a chain of activities: extraction, production, consumption, recycling and disposing. These activities are related to each other by supply and demand of producers and consumers for products, materials and scrap. Supply and demand forces determine the market prices and material flows. The model includes simple forms of forward cost linkages and backward demand linkages and it encompasses three substitution mechanisms: input substitution, material substitution and spatial substitution.
The model provides a consistent framework for material scenarios and related environmental policy analysis for Western-Europe and the Netherlands within an global economic context. The empirical validation of the model is based on time-series and on technical coefficients derived from literature. The empirical investigation increased our knowledge about predominant economic factors, mechanisms and parameters that determine the material flows, especially in the field of:
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Dematerialisation trends and the relation to GDP, energy prices and the material price.
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Recycling trends and the relation to the prices of scrap, energy and virgin materials.
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Input substitution in material production and the relation to energy demand.
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Market and cost prices of raw materials, materials and scrap.
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The sensitivity of West-European and Dutch trade flows to price differences with foreign competitors.
This paper also presents a baseline scenario for materials until 2020, two economic variants and three environmental policy variants for Western Europe and the Netherlands each to illustrate the applicability of the model in scenario and policy analysis.
Featuring the historical economic and social trends and mechanisms, future demand for most materials increases very modestly. Taking into account a considerable energy productivity gain, energy demand remains more or less constant. Plastic is a clear exception: plastic demand remains in line with economic growth and plastic industry only gains a small energy productivity increase due to the large share of feedstock demand. The policy variants show among other things that an internationally non-concerted energy price policy that increases the marginal energy costs and leaves the average energy costs unaffected may have a substantially lower international displacement effect than a uniform energy tax. Consequently, only a fraction of the domestic and foreign consumers shift their demand from energy efficient domestic producers to less efficient but cheaper foreign producers.
The policy variants show among other things that in an open economy a unilateral efficient regulatory policy is more effective than a unilateral price policy.
n° 164 (mai 2000)
CREUSEN Harold, MINNE Bert - Falling R&D but stable investments by oil companies; why?; a study on R&D and investment in fixed assets in the oil industry
Summary:
In the last decade the world-wide research expenditures of the major oil companies have dropped. This is remarkable since their investments in fixed assets remained stable. This study reveals that the level of fixed investments particularly depend on their financial strength, while R&D mainly relates to competitors' research and common expectations. The decline in R&D is initiated by common expectations. In the mature oil industry, companies foresee diminishing research potential within the current technology. This is also confirmed by the declining number of patent applications. The high risks of research on renewable energy may lead to wait and see behaviour instead of new research initiatives. Actually, oil companies have hardly applied for patents on renewable energy. The R&D decline is intensified by a dwindling R&D-race, which is due to a large overlap in research topics. The companies protect their research results because they largely compete on their unique technologies which embody their research results. The research overlap appears from patents: the oil companies apply for patents in exactly the same patent classes
n° 163 (avril 2000)
VAN LEUVENSTEIJN Michiel, KONING Pierre - Duration Dependence in Unemployment Insurance and Social Assistance: Consequences of Profiling for the Unemployed
Summary:
It is well-known that the probability of an unemployed person finding a job decreases over the unemployment spell. On the one hand, this results from duration dependence at the individual level: unemployed job seekers may become discouraged, loose their working skills and become stigmatised by potential employers (‘pure' individual effects). On the other hand, if there is variation between individual exit rates, there is dynamic sorting of the unemployed with low exit probabilities (‘sorting effects'). Based on Dutch micro-data of social assistance (SA) and unemployment insurance beneficiaries (UI) for 1989-1996, we investigate to what extent this so-called ‘negative duration dependence' is due to sorting effects, as well as ‘pure' individual effects. The analysis suggests that after an unemployment spell of half a year, the decrease in the job finding rate for SA recipients can be attributed for 20% to 25% to sorting effects. After a three- to four-year period, the probability to find a job deteriorates further, but only due to individual duration effects. For UI recipients, similar results are found. From this, we conclude that profiling measures that target the inflow of unemployed with bad job prospects bear an important risk: unemployed that are initially classified as having good job prospects may also become long-term unemployed. Therefore, labor market policies should also focus on general measures, for example, by encouraging search activities of all workers that have spent a certain length of time in unemployment
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