In this paper we build a new model for understanding the relationship between wage and inflation. We
introduce the concept of a cumulated wage gap – meaning the cumulated gap between the current wage
and a maximum reference wage value in the past. The permanent income hypothesis is fundamentally flawed
in times of crisis, because of uncertainty of future income. In a crisis, the reference is not expected income,
but rather past income. Retirement savings and linear employment prospects are uncertain. People relate
to their peak gains in the not so distant past rather than to uncertain future gains. The only certain reference
value lies in...
This paper presents a holistic overview and assessment of the European Union (EU)’s financial services policy since the start of its financial crisis in mid-2007. Its emphasis is on public policy initiatives and developments at the European level, including those specific to the euro area.
García-Herrero, Alicia; Xu, Jianwei; Marbach, Thibault
While Europe continues to hold important trade powers, the rise of China in the global economy has significantly reshaped international trade and competition. In this paper, the authors show that the degree of competition between both powers in Latin America has risen in the past decade due to China's increased trade of high-quality products. They address whether China is an increasingly relevant competitor for Europe in Latin America and in which sectors China-EU competition is fiercer. These findings should be a wake-up call to Europe in its quest to remain competitive at the global level.
Gorecki, Paul K; Lyons, Sean; Tol, Richard S.J.
Under European Union proposals for CO2 emission reduction between 2013 and 2020, a Member State can transfer to another Member State the right to use its unused Clean Development Mechanism (“CDMs”) credits. The paper addresses three issues in relation to these CDM Warrants (“CDMW”). First, how should the Member State treat the CDMW in making decisions concerning emission reduction? The price of the property right is an important signal for a Member State in deciding the level of domestic abatement compared to trading in CDMWs. In other words, a shadow price for CDMWs should be used in formulating the emission...
García-Herrero, Alicia; Xu, Jianwei
The rise of influential Chinese digital giants, including Baidu, Alibaba, Tencent and Xiaomi has shown the world that China is a global leader in digital innovation and it is not surprising that China has started to influence the global digital market. But is China exploiting its full potential in this area? To answer this question, the authors assess how big China’s digital economy is relative to the rest of its economy, and how China performs compared to the rest of the world.
Demertzis, Maria; Zenios, Stavros
Since the financial crisis, EU countries' economies have recovered to the point that they are exiting their adjustment programmes. Institutional stability mechanisms have been improved at the European level, with the promotion of the banking union and the establishment of a European Monetary Fund, for instance. However, the authors argue that such crisis contingencies should include markets in their risk-sharing, which would require better coordination with institutions.
Chiacchio, Franchesco; Petropoulos, Georgios; Pichler, David
In theory, robots can directly displace workers from performing specific tasks (displacement effect). But they can also expand labour demand through the efficiencies they bring to industrial production (productivity effect). This working paper adopts the local labour market equilibrium approach developed by Acemoglu and Restrepo to assess which effects dominate and the impact of robots on wage growth and employment rate in Europe.
European banks have been criticized for holding excessive domestic government debt during economic downturns, which has been interpreted as indicative evidence of moral suasion. By using a novel bank-level dataset covering the entire timeline of the eurozone crisis, I first re-confirm that the crisis led to the reallocation of sovereign debt from foreign to domestic banks. This reallocation was only visible for banks as opposed to other domestic private agents and it cannot be explained by the banks’ risk-shifting tendency. In contrast to the recent literature focusing only on sovereign debt, I show that banks’ private sector exposures were (at...
The penal codes of a number of countries having ratified the Convention on Cybercrime signed in Budapest in 2001, or bound by Directive 2013/40/EU, contain provisions which criminalize certain acts directed at information systems or computer data. The definitions of the concept of "system" provided in the Convention and the Directive are examined in comparison with the corresponding terms and notions used in the penal codes of France, Germany, Austria and Hungary.
Callan, T.; Colgan, B.; Keane, C.; Walsh, J.R.
The Irish healthcare system includes a complex mix of entitlements – some are universal, others age-related, and some are income-related. In this report, we concentrate on the major income-related entitlements in the current system i.e., the Medical Card and the GP Visit Card. Most medical cards are provided on an income-tested basis, and provide free access to in-patient and out-patient care in public hospitals, to GP care, and to prescription drugs. We examine how the income test for such schemes can be modelled using the detailed income and demographic information in the Survey on Income and Living Conditions. The approach...
Lynch, Muireann A.; Devine, Mel T.
Capacity remuneration mechanisms exist in many electricity markets. Capacity mechanism designs do not explicitly consider the effects of refurbishment of existing generation units in order to increase their reliability. This paper presents a mixed complementarity problem with endogenous probabilities to examine the impact of refurbishment on electricity prices and generation investment. Capacity payments are found to increase reliability when refurbishment is not possible, while capacity payments and reliability options yield similar results when refurbishment is possible. Final costs to consumers are similar under the two mechanisms with the
exception of the initial case of overcapacity.
McQuinn, Kieran; Duffy, David; Mc Inerney, Niall
The aftermath of the 2007/08 financial crisis has resulted in many Central Banks and regulatory authorities examining the appropriateness of macroprudential policy as an effective and efficient policy option in preventing the emergence of future credit bubbles. Specific limits on loan-to-value (LTV) and loan-to-income (LTI) ratios have been assessed and applied in a large number of markets both in developing and developed economies as a means of ensuring greater financial stability. The Irish property and credit market were particularly affected in the crisis as the domestic housing market had, since 1995, experienced sustained price and housing supply increases. Much of...
Tol, Richard S.J.
This paper surveys the literature on the economic impact of climate change. Different methods have been used to estimate the impact of climate change on human welfare. Studies agree that there are positive and negative impacts. In the short term, positive impacts may dominate, but these are largely sunk. In the longer term, there are net negative impacts. Poorer people tend to be more vulnerable to climate change. There is a trade-off between development policy and climate policy. Estimated aggregate impacts are not very large, but they are uncertain and incomplete. Estimates of the marginal impacts suggest that greenhouse gas...
Mayor, Karen; Tol, Richard S.J.
We use a model of international and domestic tourist numbers and flows to forecast tourist numbers and emissions from international tourism out to 2100. We find that between 2005 and 2100 international tourism grows by a factor of 12. Not only do people take more trips but these also increase in length. We find that the growth in tourism is mainly fuelled by an increase in trips from Asian countries. Emissions follow this growth pattern until 2060 when emissions per passenger-kilometre start to fall due to improvements in fuel efficiency. Forecasted emissions are also presented for the four SRES scenarios...
Savage, Michael; Callan, Tim
Comprehensive modelling of the impact of taxes and tax policy options requires data on the impact at micro-level of both direct and indirect taxes. There are, however, limits on the amount of data that can be gathered by any one survey. With some exceptions, most notably the Living Costs and Food Survey (LCF) in the UK, most national expenditure surveys are not suitable for use in detailed modelling of the direct tax and welfare system. This makes approaches which impute expenditure data into detailed income surveys of considerable interest. In this paper, we assess the sensitivity of the distributional effects...
Curtis, John; Devitt, Niamh; Whelan, Adele
The common EU framework for assessing the energy performance of residential buildings and awarding Energy Performance Certificates (EPCs) is an important resource
in the context of informing effective policy measures to improve energy efficiency. However, properties that have been assessed to-date are not likely to be fully representative of the entire housing stock and therefore provide a faulty baseline from which to devise policy actions. The paper presents a methodology to estimate the energy performance of all residential properties and,
combined with census data, identifies what distinguishes the most energy inefficient properties, whether it is location, ownership, age or other...
Di Cosmo, Valeria; Hyland, Marie
This paper uses data from the World Input Output Database (WIOD) to examine channels through which CO2 emissions are embodied within and imported into the European production process. We apply a metric to calculate sectoral emission intensity and thus rank countries and sectors in the EU in terms of their emission intensity, and look at the evolution of patterns of emission intensity in 2005 and in 2009. We use an input-output price model to simulate the effect that a rise in the price of EU-ETS allowances, from $17 to $25 /tonne, would have on the final price of goods in...
Hwang, Chang; Reynes, Frederic; Tol, Richard S.J.
Uncertainty plays a significant role in evaluating climate policy, and fat‐tailed uncertainty may dominate policy advice. Should we make our utmost effort to prevent the
arbitrarily large impacts of climate change under deep uncertainty? In order to answer to this question we propose an new way of investigating the impact of (fat‐tailed) uncertainty on optimal climate policy: the curvature of carbon tax against the uncertainty. We find that the optimal carbon tax increases as the uncertainty about climate sensitivity increases, but it does not accelerate as implied by Weitzman’s Dismal Theorem. We find the same result in a wide variety...
This paper considers Ireland’s banking crisis from the perspective of behavioural economics. It assesses whether known biases in judgement and decision-making were instrumental in the development and severity of the crisis. It investigates evidence that key decision-makers, including consumers, businesspeople, bankers and regulators, as well as parties such as civil servants, politicians, academics and journalists, were influenced by seven specific phenomena which have been identified previously via experiments and field studies. It concludes that evidence is consistent with the influence of these established phenomena. Ireland’s long boom, rapid financial integration and lack of relevant past experience may have increased the...
Tol, Richard S.J.
This paper uses a vote-counting procedure to estimate the probability density function of the total economic impact as a parabolic function of global warming. There is a wide range of uncertainty about the impact of climate change up to 3ºC, and the information becomes progressively more diffuse beyond that. Warming greater than 3ºC most likely has net negative impacts, and warming greater than 7ºC may lead to a total welfare loss. The expected value of the social cost of carbon is about $29/tC in 2015 and rises at roughly 2% per year.