Overview publications

This paper by Ulrich Hege (Toulouse School of Economics) and Pierre Mella Barral (TBS Business School) examines two prominent approaches to design efficient mechanisms for debt renegotiation with dispersed bondholders: debt exchange offers that promise enhanced liquidation rights to a restricted number of tendering bondholders (favored under U.S. law), and collective action clauses that allow to alter core bond terms after a majority vote (favored under U.K. law). The authors use a dynamic contingent claims model with a debt overhang problem, where both hold-out and hold-in problems are present. They show that the former leads to a more efficient mitigation of the debt overhang problem than the latter. Dispersed debt is desirable, as exchange offers also achieve a larger and more efficient debt reduction relative to debt held by a single creditor.

In this working paper, Andreas Backhaus and Mikkel Barslund (Centre for European Policy Studies) find that women of later working age who become grandmothers are more likely to leave the labour market than women without grandchildren, according to new research from EconPol Europe. Male labour supply, however, does not significantly adjust in response to grandparenthood. The probability of women aged between 55 and 64 continuing to participate in the labour market can fall from an average of 45% to 15% after the arrival of grandchildren, according to the research. The negative effect of grandparenthood is particularly pronounced following the arrival of the first grandchild and for grandmothers who live close to their children.

In this working paper, António Afonso (ISEG – Lisbon School of Economics and Management, Universidade de Lisboa; REM – Research in Economics and Mathematics, UECE) and Frederico Silva Leal (ISEG – Lisbon School of Economics and Management, Universidade de Lisboa; Portuguese Economy Ministry) estimate short- and long-run elasticities of private consumption for fiscal instruments. They find that positive tax revenue elasticities indicate that consumers have a Ricardian behaviour, while social benefits appear to have a non-Keynesian effect on private consumption. Private consumption continues to exhibit a non-Keynesian response to tax increases, and other expenditures have a recessive impact during normal times. After the launch of the EMU, expansionary fiscal consolidations became harder to observe.

Bank loans continue to be the main source of external financing for small and medium-sized enterprises (SMEs), in both the Netherlands and other European countries. Businesses are using those loans for expansion, innovation or as working capital.  But Dutch SMEs are applying for fewer bank loans, and those applications are often rejected by the banks. How does SME bank financing in the Netherlands relate to other European countries, and what are the reasons for the differences?

Industrial production in the German car industry dropped by 9.4% in the third quarter of 2018, creating an immediate impact on its main trading partners and causing global and sectoral losses. The decline is mainly due to problems with the implementation of the new Worldwide Harmonized Light-Duty Vehicles Test Procedure (WLTP). As the car producing industry is the most important sector for the German economy and is deeply integrated into international value-added chains, this policy report presents estimated sectoral and
global impacts due to this sharp drop. 

China’s success with state capitalism poses security concerns and huge economic challenges for western market economies. Its economy has boomed over the past 20 years, with private industry contributing much to recent success. And while private industry has helped the rise of China, it’s only one part of the economy. State enterprises and state-controlled firms play a dominant role; the former accounts for 35% of China’s GDP. Amidst uncertainty over how the trade-off between private corporate dynamics and government management of firms will develop, Achim Wambach says Europe needs to work with China to create fair competition and avoid unilateral protectionism.

To prevent the average global temperature rising by more than 1.5° celsius, we need to reduce global net greenhouse gas (GHG) emissions to zero by 2050. The EU’s current target is a reduction of emissions by 80-95% by 2050. However, the EU itself estimates that it will only achieve about 60% with a continuation of current policies. In 2017, GHG emissions rose after falling by almost 23% between 1990 and 2016. Prof. Dr. Karen Pittel examines the evidence and suggests a framework for action.

Patent boxes have become an increasingly popular tax instrument in the European Union and the US to attract mobile tax bases of multinational enterprises (MNEs) as well as to foster productivity. This paper shows that MNE affliates that can benefit from the preferential regime report 8.5 percent higher profits. The profit change splits up into a profit shifting and a productivity effect in proportions 2/3 and 1/3. Surprisingly, the profit shifting effect includes an unintended, reversed profit shifting out of the affiliate. Contrary to expectation, the overall tax base adjustment might lower tax revenues collected from MNEs.

The development and diffusion of new technologies scores high on the policy agenda of the European Union (EU) as well as its member states. The EU seeks to limit the technological gap towards other major economies. This manifests in the rapid growth of the digital economy that has evoked an intensified interests on the part of the EU and its member countries not only to foster technological innovations, but also to compete for innovative, internationally mobile firms.

Is a fiscal stimulus of investment a viable complement to, or substitute for, monetary policy? The authors of this working paper show that, under a balanced-budget stimulus, investment acceleration may come at the expense of decreased total welfare and that where uncertainty is higher about private returns a net efficiency loss is more likely. However, the risk of such negative outcome strongly declines when the government spending is balanced by taxing both private and public returns on investment.