Flexibility versus Stability: A difficult trade-off in the eurozone. CEPS Working Document No. 422, 29 April 2016

Optimal currency area (OCA) theory has been influential in pushing eurozone countries towards structural reforms to make product and labour markets more flexible. The underlying assumption of the OCA prescription for structural reform is that asymmetric shocks are permanent. However, when shocks are temporary it does not follow that more flexibility is the answer. When shocks are the result of business-cycle movements, the way to deal with them is by stabilisation efforts. This paper provides empirical evidence that suggests that the biggest shocks in the eurozone were the result of business-cycle movements. These were relatively well synchronised, except for their amplitude. We argue that efforts to stabilise business cycles should be strengthened relative to the efforts that have been made to impose structural reforms, with consideration given to the implications for the governance of the eurozone.

Learning from the Nordic welfare model: what and how? EU Centre Singapore Working Paper No. 16, September 2013

This paper posits that the Nordic countries were able to ensure good standards of equality for its citizens, while at the same time maintaining decent levels of economic growth. This can be attributed to the Nordic countries’ more holistic approach towards social spending and their focus on uplifting the skill levels of its workforce. Thus, the notion that there must be a trade-off between economic performance and a more aggressive welfare regime should be examined more thoroughly. The debate for policy makers should perhaps be framed with regard to where the balance should be between growth and equity rather than a trade-off. Firstly, the paper will elaborate on what exactly the “Nordic model” is, based on a broad literature review. Next, the paper will unpack the key characteristics of the Nordic model and analyse if indeed expansive welfare provided through state support erodes work ethic and impact the economic competitiveness of countries. Next, the paper will provide an explanation for how the balance between economic and social objectives is maintained, in some of the Nordic countries. Lastly, the paper discusses whether the same balance can be achieved in Singapore.

Discretion and Accountability: The ESMA Judgment and the Meroni Doctrine. Bruges European Economic Research (BEER) Papers 30/2014

This paper assesses the effectiveness of the Meroni doctrine in the light of the recent judgment in the ESMA case. The first part explains in detail the problem of delegation of powers in the EU from the perspective of the principal-agent theory and complements it with the analysis of the trade-off between different levels of independence and accountability of agencies. A simple economic model is developed to illustrated the relationship between the independence and accountability of an agency. It shows that it is the accountability mechanism that induces the agent to act, rather than the extent of his independence. The paper also explains the inter-temporal interactions between the principal and the agent on the basis of the incentives in place for the different players. The second part is devoted to analysis of the functioning of ESMA in the context of its delegated powers. After the presentation of main aspects of the regulatory framework establishing ESMA, the paper continuous with an analysis and interpretation of the discretionary powers of ESMA. The rather rigid position of the Court of Justice in relation to the Meroni doctrine seems to be unsuitable to delegation of complex regulatory tasks. This is particularly evident in the case of financial markets. Finally, the judgment does not examine in any detail whether and how the principals - i.e. the EU and Member States - are best able to evaluate the quality of ESMA decisions and regulations and whether there are different but more effective accountability mechanisms.

The CAP post-2013: more equitable, green and market-oriented? Based on the seminar held by Egmont on the 25th of November. European Policy Brief No. 5, December 2011

Following a seminar on the CAP post- 2013 held by Egmont - with the cooperation of the Polish Presidency - on the 25th of November 2011, Egmont commissioned the present policy brief. Three major policy issues were addressed at this occasion, namely; how to make the CAP more equitable, green and market-oriented? The trade-off between these policy issues will require policy choices that are worthy of analysis.

Falling Labor Share and Rising Unemployment: Long-Run Consequences of Institutional Shocks? CES Germany & Europe Working Papers, No. 00.2, 1999

The literature on unemployment has mostly focused on labor market issues while the impact of capital foonation is largely neglected Job-creation is often thought to be a matter of encouraging more employment on a given capital stock. In contrast, this paper explicitly deals with the long-run consequences of institutional shocks on capital foonation and employment. It is shown that the usual trade off between employment and wages disappears in the long run. In line with an appropriation model, the estimated values for the long-run elasticities of substitution between capital and labor for Germany and France are substantially greater than one.

Liberalising trade in services: creating new migration opportunities? Research Paper in Law, 1/2010

Introduction. It is quite uncommon to associate migration with the rules on services trade. Indeed, all economic definitions of services insist on their immaterial nature and on the increased possibility of trading them ‘virtually’ over networks or else, without any physical movement of the parties involved. Somehow this ‘immaterial’ nature of services reflects on their providers/recipients which seem to be ‘invisible’. Even though most services still require the physical contact of the provider with the recipient1 and, when provided over national borders, do entail migration, service providers and/or recipients are rarely thought of as ‘immigrants’. This may be due to the fact that they enter the foreign territory with a specific aim and, once this aim accomplished, move back to their state of origin; technically they only qualify as short term non-cyclical migrants and are of little interest to policy-makers. A second reason may be that both service providers and recipients are economically desirable: the former are typically highly skilled and trained professionals and the latter are well-off ‘visitors’, increasing consumption in the host state. The legal definition of services in Article 57 TFEU (ex Art. 50 EC) further nourishes this idea about service providers/recipients not being migrants: the relevant Treaty rules only apply when the provisions on free movement of workers and freedom of establishment – themselves clearly linked to migration – do not apply. This distinction has been fleshed up by the ECJ which has consistently held that the distinction between the rules on establishment, on the one hand, and the rules on services, on the other, lies on duration.2 Indeed, all EC manuals state four types of service provision falling under the EC Treaty: a) where the service provider moves to the recipient’s state, for a short period of time (longer stay would amount to establishment), b) where the service recipients themselves move to the state where the service is offered (eg for medical care, education, tourism etc), c) where both service providers and recipients move together in another member state (eg a tourist guide accompanying a group travelling abroad) and d) where the service itself is provided across the borders (typically through the use of ICTs). None of these situations would typically qualify as migration. The above ‘dissociation’ between services and migration has been gradually weakened in the recent years. Indeed, migration is increasingly connected to the transnational provision of services. This is the result of three kinds of factors: developments in the European Court of Justice’s (ECJ) case law; legislative initiatives in the EU; and the GATS. Each one of these is considered in some detail below. The aim of the analysis which follows is to show the extent to which (legislative and judicial) policies aimed at the free provision of services actively affect migration conditions within the EU. The EC rules on the provision of services primarily affect the movement of EU nationals. As it will be shown below, however, third country nationals (TCNs) may also claim the benefits of the rules on services, either as recipients thereof or as employees of some EC undertaking which is providing services in another member state (posted workers).

EU Trade Actors after Lisbon: Enhanced Negotiations or Business as Usual? Brugges Political Research Paper No. 32, November 2013

As seen by the launching of trade negotiations with Japan and the United States, the European Union has shifted gears in order to achieve amplified benefits in bilateral trade agreements. The entry into force of the Lisbon Treaty brought the European Parliament and the European External Action Service into the picture as new actors in trade negotiations. The question arises if the new framework of trade negotiations is better off than the pre-Lisbon era. By applying Veto Players theory to the Central American Association Agreement and Principal-Agent theory to the Ukrainian Association Agreement, two results were concluded. First, the participation of the European Parliament as a veto player has decreased the effectiveness of trade negotiation. Second, the participation of the European External Action Service has shown the contrary, namely an increase of effectiveness in trade negotiations.

TTIP’s Hard Core: Technical barriers to trade and standards. Paper No. 13 in the CEPS-CTR project ‘TTIP in the Balance’ and CEPS Special Report No. 117/August 2015

Michelle Egan and Jacques Pelkmans provide an overview of the TBT chapter in TTIP and the various issues between the US and the EU in this area, which in turn requires extensive expositions of domestic regulation in the US and the EU. TBTs, outside heavily regulated sectors such as chemicals, automobiles or medicines (which have separate chapters in TTIP), can be caused by divergent (voluntary) standards, technical regulations and conformity assessment. Indeed, in all three the US and the EU have long experienced frictions with considerable trading costs. The 1998 Mutual Recognition Agreement about conformity assessment only succeeded in two out of six sectors. The US and European standardisation traditions differ and this paper explains why it is so hard, also economically, to realise convergence. However, the authors reject the unproductive ‘stand-off’ between US and EU negotiators on standardisation and suggest to clarify the enormous economic ‘installed base’ of prominent US standards in the world economy and build a solution from there. As to technical regulation, the prospect of converging regulation (via harmonisation) is often dim, but equivalence (given similar levels of regulatory protection) can be an option.