Off-farm Labour Decision of Italian Farm Operators. Factor Markets Working Document No. 61, August 2013

This paper analyses the factors affecting off-farm labour decisions of Italian farm operators. Using micro-level data from the Farm Business Survey (REA) over the pre- and post-2003 CAP reform periods, we investigated the impact that operator, family, farm and market characteristics exert on these choices. Among other things, the paper focuses also on the differential impact of those variables for operators of smaller and larger holdings. The main results suggest that operator and family characteristics have a significant impact on the decision to participate in off-farm work more for smaller than for bigger farms. By contrast, farm characteristics are more relevant variables for bigger farms. In particular, decoupled farm payments, by increasing the marginal productivity of farm labour, lower the probability of working off the farm only in bigger farms, while coupled subsidies in pre-reform years do not have a significant impact on labour decisions. Finally, we show that, after accounting for the standard covariates, local and territorial labour market characteristics generally have a low effect on off-farm work operators’ choices.

The ICC Debate and the EU-U.S. Struggle for Influence: The Case of the Balkan-6. ACES Working Paper No. 11, October 2007

The objectives of the European Union (EU) and the United States (US) for the countries of the Balkan region are generally assumed to be complementary. They both stress and condition their support and assistance on the progress that these countries make with regards to economic modernization, build-up of social institutions, and respect for international law. However, this rhetoric doesn't always match the facts on the ground. Often, instead of dealing with a cohesive set of policy recommendations, the countries in the region are faced with contradictory alternatives and zero-sum choices. The debate over the development of the International Criminal Court (ICC) was such a case. It centered on whether the countries in the region should exempt US personnel from the jurisdiction of the Court while in the country and thus rendering them immune from prosecution for any crimes committed for which the US courts were not willing or able to take any action. The final outcome was mixed. Three of the countries - Croatia, Serbia (and Montenegro), and Slovenia - decided not to give in to US pressure, while the remaining three - Albania, Bosnia and Herzegovina, and Macedonia - ignored the pleas and threats of the EU and of the various international non-governmental organizations and decided to sign Bilateral Immunity Agreements (BIAs) with the US. How can one explain such divergent outcomes? I argue that the credibility of actors involved played an important role in determining whether threats coming from the US or the EU were more credible, thus tipping the scales in favor of signing BIAs with the US. However, the issue of threat credibility serves only to narrow down the choices of actors. Further determination of the outcome necessitates a look at the nature of the security context in which these countries exist and operate.

Horizontal and Vertical Interdependence in the Multinational Subsidiary Networks. ACES Working Paper No. 7, July 2008

Existing theoretical studies have predicted that a multinational firm's location choices are interdependent across countries. Little has, however, been done to test the hypothesis at individual subsidiary level. This paper uses a detailed French multinational subsidiary dataset and estimates how a firm's decision to invest in a foreign country is not only conditional on the characteristics of that country but also the firm's existing subsidiary network Using a structural spatial econometric model, the paper finds evidence of both horizontal and vertical interdependence in multinationals' location decisions. The results indicate that while multinational firms have little incentive to duplicate their production in countries with low bilateral trade costs, they are motivated to build a vertical subsidiary network in these countries ~ especially when the countries have complementary comparative advantages.

The Balkan Summer of 2011. ACES Working Papers, 2011

“Turning point” has become somewhat of a cliché as a description of where a country or a region stands at a point in time. The ancient Greek philosopher Heraclitus said “you cannot step twice into the same stream” and, to be sure, life is the story of constant change and turns. Nonetheless, individuals and countries are occasionally confronted with choices so important that the course taken will likely determine subsequent events for years, even decades. Several of the countries of the Western Balkans face these kinds of decision in the summer of 2011, as does the European Union, and to some extent, the United States.

Social Democracy, Globalization and Governance: Why is there no European Left Program in the EU? CES Germany & Europe Working Papers, No. 00.6, April 2000

This paper addresses globalization and governance in the EU by attempting to generate some plausible hypotheses that might explain the policy choices of the 12 out of 15 European democratic left governments. With all of the discussion in recent years of a democratic deficit, and then need to maintain a "social Europe," why have these governments not produced more explicit left-wing policies? It suggests three possible hypotheses to account for this apparently mysterious outcome. Hypothesis #1: They want to but they can't. Hypothesis #2: They don't want to because they aren't really left anymore. Hypothesis #3: They could, but they all are suffering from a fundamental failure of imagination. The paper explores each of these hypotheses in two ways. First it examines the initial years of the Schröder government in Germany apparently, pursuing each of these three hypotheses and different times during this period. Then it looks more systematically and comparatively and each of the three hypotheses by including analysis both of Germany and several other EU member states. The larger goal of this work is to provoke discussion and research on what role left political movements can actually play. Is it even reasonable to expect such a group of nation states to develop innovative forms of cross-national governance? Or are new and/or revised forms of representation and governance beyond traditional nation-state models.

The Political Economy of Financial Crisis Policy. Bruegel Working Paper 2015/06, July 2015

Highlights • Government intervention to stabilise financial systems in times of banking crises ultimately involves political decisions. This paper sheds light on how certain political variables influence policy choices during banking crises and hence have an impact on fiscal outlays. • We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. • Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors.

What kind of European Banking Union? Bruegel Policy Contribution [2012/12?]June 25, 2012

This paper discusses the creation of a European Banking Union. First, we discuss questions of design. We highlight seven fundamental choices that decision makers will need to make: Which EU countries should participate in the banking union? To which categories of banks should it apply? Which institution should be tasked with supervision? Which one should deal with resolution? How centralised should the deposit insurance system be? What kind of fiscal backing would be required? What governance framework and political institutions would be needed? In terms of geographical scope, we see the coverage of the banking union of the euro area as necessary and of additional countries as desirable, even though this would entail important additional economic difficulties. The system should ideally cover all banks within the countries included, in order to prevent major competitive and distributional distortions. Supervisory authority should be granted either to both the ECB and a new agency, or to a new agency alone. National supervisors, acting under the authority of the European supervisor, would be tasked with the supervision of smaller banks in accordance with the subsidiarity principle. A European resolution authority should be established, with the possibility of drawing on ESM resources. A fully centralized deposit insurance system would eventually be desirable, but a system of partial reinsurance may also be envisaged at least in a first phase. A banking union would require at least implicit European fiscal backing, with significant political authority and legitimacy. Thus, banking union cannot be considered entirely separately from fiscal union and political union. The most difficult challenge of creating a European banking union lies with the short-term steps towards its eventual implementation. Many banks in the euro area, and especially in the crisis countries, are currently under stress and the move towards banking union almost certainly has significant distributional implications. Yet it is precisely because banks are under such stress that early and concrete action is needed. An overarching principle for such action is to minimize the cost to the tax payers. The first step should be to create a European supervisor that will anchor the development of the future banking union. In parallel, a capability to quickly assess the true capital position of the system’s most important banks should be created, for which we suggest establishing a temporary European Banking Sector Task Force working together with the European supervisor and other authorities. Ideally, problems identified by this process should be resolved by national authorities; in case fiscal capacities would prove insufficient, the European level would take over in the country concerned with some national financial participation, or in an even less likely adverse scenario, in all participating countries at once. This approach would require the passing of emergency legislation in the concerned countries that would give the Task Force the required access to information and, if necessary, further intervention rights. Thus, the principle of fiscal responsibility of respective member states for legacy costs would be preserved to the maximum extent possible, and at the same time, market participants and the public would be reassured that adequate tools are in place to address any eventuality.

Self-Fulfilling Crises in the Eurozone: An Empirical Test. CEPS Working Document No. 366, 22 June 2012

This paper tests the hypothesis that government bond markets in the eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios and fiscal space variables, and was the result of negative self-fulfilling market sentiments that became very strong since the end of 2010. We argue that this can drive member countries of the eurozone into bad equilibria. We also find evidence that after years of neglecting high government debt, investors became increasingly worried about this in the eurozone, and reacted by raising the spreads. No such worries developed in stand-alone countries despite the fact that debt-to-GDP ratios and fiscal space variables were equally high and increasing in these countries.

Germany as viewed by other Member States. EPIN Working Paper No. 33, 21 June 2012

Germany’s problem is not so much that it is generally right about the need for fiscal discipline but that it has to learn how to be right: this is the most difficult issue to manage from a political standpoint. This EPIN (European Policy Institutes Network) paper brings together contributions from a cross-section of EU member states and the Gallup World Poll survey on the question of how Germany is being viewed at this time of economic and political crisis. The conclusions, subtitled: The Narcissism of Small Differences is a refreshingly candid and insightful analysis of current European relations, noting that Germany’s current weight reflects only the conjuncture of extraordinary domestic and international economic factors. How Germany and the other member states behave towards one another now will have implications for all long after this moment has passed.

The creation of euro area financial safety nets. Bruegel Working Paper 2012/09, July 2012

The financial crisis has exposed the need to devise stronger and broader international and regional safety nets in order to deal with economic and financial shocks and allow for countries to adjust. The euro area has developed several such mechanisms over the last couple of years through a process of trial and error and gradual enhancement and expansion. Their overall architecture remains imperfect and leaves areas of vulnerabilities. This paper provides an overview of the recent financial stability mechanisms and their various shortcomings and tries to brush the outline of a more comprehensive safety net architecture that would coherently address the banking, sovereign and external imbalances crises against both transitory and more permanent shocks. It aims to provide a roadmap for further improvements of the current mechanism and the creation of new devices including a banking resolution mechanism and amore powerfulmechanismto provide financial assistance addressing both the sovereign and external dimensions of the shocks thereby reducing the need for the ECB to fill the current void.

Path to eurobonds. Bruegel Working Paper 2012/10, July 2012

This paper discusses proposals for common euro area sovereign securities. Such instruments can potentially serve two functions: in the short-term, stabilize financialmarkets and banks and, in the medium-term, help improve the euro area economic governance framework through enhanced fiscal discipline and risk-sharing. Many questions remain onwhether financial instruments can ever accomplish such goals without bold institutional and political decisions, and,whether, in the absence of such decisions, they can create new distortions. The proposals discussed are also not necessarily competing substitutes; rather, they can be complements to be sequenced along alternative paths that possibly culminate in a fully-fledged Eurobond. The specific path chosen by policymakers should allow for learning and secure the necessary evolution of institutional infrastructures and political safeguards.