Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth

This paper describes the endogenous growth version of the QUEST III model and uses it to analyse the macroeconomic impact of various structural reform measures. This paper describes a micro-founded DSGE model with endogenous growth that is used to analyse the macroeconomic impact of structural reforms in Europe. The new QUEST III model is a useful tool for analysing the costs and benefits of reforms in terms of concrete and quantifiable policy measures, in particular fiscal policy instruments such as taxes, benefits, subsidies and education expenditures, administrative costs faced by firms and regulatory indices. Our results confirm the beneficial effects on output and employment of skill-biased tax reforms, measures that improve the skill composition of the labour force, R&D subsidies, raising competition in final goods market, increased financial market integration and measures that remove entry barriers in certain markets. The model also allows us to examine the adjustment path and the time lags involved before these benefits can be reaped.Structural reforms, endogenous growth, R&D, DSGE modelling, Roeger, Varga , in 't Veld, Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth

The Production and Consumption Accounting Principles as a Guideline for Designing Environmental Tax Policy

This paper evaluates two alternative tax policies aimed at reducing atmospheric pollutant emissions. One based upon an environmental tax that burdens directly firms’ emissions, and the other one that burdens both directly and indirectly household consumption’s emissions. Applying input-output approach, we reallocate the emissions generated in the economy according to the responsibility definition, i.e. the production or the consumption accounting principle. Afterwards, we analyse the effects on the products’ prices of implementing an ad-quantum environmental tax based on the Producer Pays Principle (PPP) and/or on the User Pays Principle (UPP). The results obtained, show that both PPP and UPP environmental tax have the same effect on the final products’ prices. However, the price of the intermediate products is only affected by the PPP environmental tax, whereas the UPP environmental tax keeps the prices unchanged.Input-Output Analysis, Environmental Taxes, Atmospheric Pollutants

How to close the productivity gap between the US and Europe: A quantitative assessment using a semi-endogenous growth model

This paper uses a semi-endogenous growth model to identify possible sources for three interrelated stylised differences between the EU and the US, namely a higher level of productivity and knowledge investment and larger skill premia in the US compared to the EU. The model allows us to explain these differences in terms of differences in subsidies to R and D, mark ups, administrative entry barriers and financial frictions.The paper provides a ranking about the relative importance of these factors. Goods market competition and both administrative and financial entry barriers are the most important explanatory factors for lower productivity in the EU, while entry barriers explain the bulk of the knowledge investment gap and high skilled wage premia.productivity differences endogenous growth R and D market structure skill composition dynamic general equilibrium modelling Economic P how to close the productivity gap between the US a quantitative assessment using a semi-endogenou Varga Roeger in 't Veld European Economy. Economic Papers

The Indian Economy Since Liberalisation: the Structure and Composition of Exports and Industrial Transformation (1980 – 2000)

This paper assesses empirically structural change in the Indian manufacturing based export sector, based on an analysis of 143 industries / product groupings (mainly manufacturing industries). Trade indices such as Balassa´s revealed comparative advantage (RCA) index, and other variants commonly employed in the literature are used in our analysis. Regression analysis on the RSCA indices is used to further analyse structural change. Thereafter, the stability of the RCA indices is examined, as well as the process of their intertemporal evolution. Three technology categories (high technology, medium technology and low technology) are examined individually and SITC product codes are used as proxies for export industries, in order to look at industry movements within each of these groups. This analysis enables us to assess the export performance of Indian industries in the selected product-industry groupings in detail and evaluate the prospects for growth of particular Indian industrial groupings

US Intrafirm Trade: Sectoral, Country and Location Determinants in the 90s.

This paper studies the evolution and determinants of US interfirm trade between 1989-98. We will extend preview: similar econometric testing not only by using more recent data but also by considering inter-country differences In addition to inter-sectoral variation of interfirm trade. At the sectoral revet relevant factors appear to be technology intensity, the level of vertical integration, economies of scale and lh' Ie?eI of international production, as well as the impact of the geographic concentration of US parent firms. At the country level, the size of the market and some country specificities appear to favor interfirm trade while increasing levels of the tax rate on profits of th/ foreign country and economic distance disincentives this trade.

Dynamic CGE model of the Chinese economy for fiscal and financial policy analysis

China is to become the largest economy in the world by 2020 according to the IMF forecasts. Annual growth rates of output remained around 9.3 percent on average during 1980 to 2015. It was made possible by the accumulation capital with steady flows of investment on average around 49.5 percent of GDP, increase in the human capital index from 1.8 to 2.6 in the country that has the largest population among all countries. Current account surplus stood around 3.4 percent of GDP. Such growth rates were possible due to macroeconomic stability. Market friendly growth strategy however has led to a sharp increase in the income and consumption inequality. Inequality is deeper in the rural areas than in the urban areas. A representative household in the richest quintile earns eight times more than an average household in poorest quintile. This is five times more in urban areas. The Gini coefficient was around 0.48. By this measure China has become the most unequal economy in the world. Similar disparities remain across provinces of China; per capita income of Tianjin was 99,600 Yuan compared to 22,921 Yuan of Guizhou. Chinese government has used public spending to create economic infrastructure and public services. The share of public spending and revenue has reached around 30 percent of GDP in China in recent years. Share of local government has risen steadily over years from 53 percent to 86 percent in 2013. Efficiency in the local governance thus is essential for correcting economic and social problems in China. VAT, corporation tax, business tax, consumption tax and income tax and tariffs are important sources of revenue. In 2013, these contributed to 26, 20, 16, 7, 6 and 2 percents of total revenue respectively. Compared to advance countries Chinese tax system still seems very regressive as the income tax contributes to the very small proportion of the total revenue. It is welcome to see that the share of VAT decreased from 36 to 26 percent and tax in corporate income tax rose from eight to 20 percent but the very low income tax that accounts about 6 percent of total revenue, has caused income inequality to deteriorate. The adverse consequences of tax composition are to some extent mitigated by a more reasonable structure of public spending. Education, social safety, agriculture, public services, community, transport and health had 18, 12, 11, 11, 10 seven and 7 percent of public spending respectively

The Indian Economy Since Liberalisation: the Structure and Composition of Exports and Industrial Transformation (1980 – 2000)

This paper assesses empirically structural change in the Indian manufacturing based export sector, based on an analysis of 143 industries / product groupings (mainly manufacturing industries). Trade indices such as Balassa’s revealed comparative advantage (RCA) index, and other variants commonly employed in the literature are used in our analysis. Regression analysis on the RSCA indices is used to further analyse structural change. Thereafter, the stability of the RCA indices is examined, as well as the process of their intertemporal evolution. Three technology categories (high technology, medium technology and low technology) are examined individually and SITC product codes are used as proxies for export industries, in order to look at industry movements within each of these groups. This analysis enables us to assess the export performance of Indian industries in the selected product-industry groupings in detail and evaluate the prospects for growth of particular Indian industrial groupings.India, revealed comparative advantage, manufacturing exports, industrial transformation

The Financial Integration of the European Union: Common and Idiosyncratic Drivers

The purpose of this paper is to establish how far the process of financial integration has gone in the European Union. There is growing evidence that the appearance of the Euro has accelerated the integration of a number of financial markets among those countries who have adopted the Euro. We identify the growth in financial integration as the process by which idiosyncratic factors at the national level become less and less important for the behaviour of particular markets. While the Euro plays an important part because it eliminates currency risk, financial integration will still emerge between other European countries as long as the institutional and legal barriers are removed.

The European Emission Trading Scheme and environmental innovation diffusion: Empirical analyses using Italian CIS data

We study the driving forces behind the adoption of environmental innovations (EI) in the Italian economy over 2006-2008 through empirical analyses of the new wave of Community Innovation Survey (CIS) data that covered environmental innovation adoptions in different realms (energy, carbon, production, consumption, etc..). Given the shortage of studies that have empirically assessed the innovation effects of ETS at micro econometric level, we investigate whether the first phase of EU ETS (started in 2005-2006) has exerted some effects on environmental innovations. We then include in a typical probit innovation function some policy stringency indicators, for the ETS sectors, to verify whether the likelihood of adopting environmental innovations is stimulated among other factors by the ETS lever. We test a wide and comprehensive set of potential drivers, including internal factors (R&D), external (to the firm) factors (cooperation, networking), international drivers (foreign related relationships), and mostly important, the dynamic incentives to innovation eventually provided by the ETS implementation. Estimates show that external forces and complementarity with other management practices are particularly relevant to increase the adoption of relatively new and radical technologies: relationships with other firms and institutions, local public funding, group membership are the key factors in this sense. Training is also positively related to EI, confirming recent evidence. The role of ETS on EI seems instead to be weak, but it turns out to be significant for energy efficiency innovations and for consumption level/good related reductions of atmospheric and water emissions.environmental innovation; industrial sectors; ETS; innovation drivers; CIS data

Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market-Oriented and Blockholder-Based Governance Regimes

This study investigates the impact of corporate governance and product market competition on total factor productivity growth for two large samples of German and UK firms. In poorly performing UK firms, the presence of strong outside blockholders lead to substantial increases in productivity. Contrarily, for German poorly performing and distressed firms, it is bank debt concentration which stimulates productivity growth. Whereas high bank debt concentration also supports productivity growth in German profitable firms, leverage is unrelated to productivity growth in UK firms. Weak product market competition in the UK has a negative impact on productivity growth of in both widely-held firms and concentrated firms with the exception of firms controlled insiders (directors). These seem able to generate productivity increases in firms subject to little market discipline. For profitable German firms, the relation between strong blockholder control and productivity growth is limited. Only control by banks, insurance firms and the government can somewhat reduce the negative effect of weak product market competition.corporate governance;productivity growth;ownership and control;product market competition;financial distress