A simple model of multiple equilibria and default. CEPS Working Document No. 366, 16 July 2012

This Working Document by Daniel Gros presents a simple model that incorporates two types of sovereign default cost: first, a lump-sum cost due to the fact that the country does not service its debt fully and is recognised as being in default status, by ratings agencies, for example. Second, a cost that increases with the size of the losses (or haircut) imposed on creditors whose resistance to a haircut increases with the proportional loss inflicted upon them. One immediate implication of the model is that under some circumstances the creditors have a (collective) interest to forgive some debt in order to induce the country not to default. The model exhibits a potential for multiple equilibria, given that a higher interest rate charged by investors increases the debt service burden and thus the temptation to default. Under very high debt levels credit rationing can set in as the feedback loop between higher interest rates and the higher incentive to default can become explosive. The introduction of uncertainty makes multiple equilibria less likely and reduces their range.

Breaking down the barriers to firm growth in Europe: The fourth EFIGE policy report. Bruegel Blueprint 18, 28 August 2012

Large firms contribute disproportionately to the economic performance of countries: they are more productive, pay higher wages, enjoy higher profits and are more successful in international markets. The differences between European countries in terms of the size of their firms are stark. Firms in Italy and Spain, for example, are on average 40 percent smaller than firms in Germany. The low average firm size translates into a chronic lack of large firms. In Italy and Spain, a mere 5 percent of manufacturing firms have more than 250 employees, compared to a much higher 11 percent in Germany. Understanding the roots of these differences is key to improving the economic performance of Europe’s lagging economies. So why is there so much variation in firm size in different European countries? What are the barriers that keep firms in some countries from growing? And which policies are likely to be most effective in breaking down those barriers? This policy report aims to answer these questions by developing a quantitative model of the seven European countries covered by the EFIGE survey (Austria, France, Germany, Hungary, Italy, Spain and the UK). The EFIGE survey asked 14,444 firms in those countries about their performance, their modes of internationalisation, their staffing decisions, their financing structure, and their competitive environment, among other topics.

The Court of Justice of the European Union as a fundamental rights tribunal: challenges for the effective delivery of fundamental rights in the area of freedom, security and justice. CEPS Paper in Liberty and Security in Europe No. 49, 29 August 2012

This paper reflects on the challenges facing the effective implementation of the new EU fundamental rights architecture that emerged from the Lisbon Treaty. Particular attention is paid to the role of the Court of Justice of the European Union (CJEU) and its ability to function as a ‘fundamental rights tribunal’. The paper first analyses the praxis of the European Court of Human Rights in Strasbourg and its long-standing experience in overseeing the practical implementation of the European Convention for the Protection of Human Rights and Fundamental Freedoms. Against this analysis, it then examines the readiness of the CJEU to live up to its consolidated and strengthened mandate on fundamental rights as one of the prime guarantors of the effective implementation of the EU Charter of Fundamental Rights. We specifically review the role of ‘third-party interventions’ by non-governmental organisations, international and regional human rights actors as well as ‘interim relief measures’ when ensuring effective judicial protection of vulnerable individuals in cases of alleged violations of fundamental human rights. To flesh out our arguments, we rely on examples within the scope of the relatively new and complex domain of EU legislation, the Area of Freedom, Security and Justice (AFSJ), and its immigration, external border and asylum policies. In view of the fundamental rights-sensitive nature of these domains, which often encounter shifts of accountability and responsibility in their practical application, and the Lisbon Treaty’s expansion of the jurisdiction of the CJEU to interpret and review EU AFSJ legislation, this area can be seen as an excellent test case for the analyses at hand. The final section puts forth a set of policy suggestions that can assist the CJEU in the process of adjusting itself to the new fundamental rights context in a post-Lisbon Treaty setting.

Which economic model for a water-efficient Europe? Report of a CEPS Task Force. CEPS Task Force Report, 27 November 2012

This CEPS Task Force Report focuses on how to improve water efficiency in Europe, notably in public supply, households, agriculture, energy and manufacturing as well as across sectors. It presents a number of recommendations on how to make better use of economic policy instruments to sustainably manage the EU’s water resources. Published in the run-up to the European Commission’s “Blueprint to Safeguard Europe’s Waters”, the report contributes to the policy deliberations in two ways. First, by assessing the viability of economic policy instruments, it addresses a major shortcoming that has so far prevented the 2000 EU Water Framework Directive (WFD) from becoming fully effective in practice: the lack of appropriate, coherent and effective instruments in (some) member states. Second, as the Task Force report is the result of an interactive process involving a variety of stakeholders, it is able to point to the key differences in interpreting and applying WFD principles that have led to a lack of policy coherence across the EU and to offer some pragmatic advice on moving forward.

Justice and Home Affairs databases and a Smart Borders System at EU external borders. An evaluation of current and forthcoming proposals. CEPS Paper in Liberty and Security No. 52/December 2012

This study examines current and forthcoming measures related to the exchange of data and information in EU Justice and Home Affairs policies, with a focus on the ‘smart borders’ initiative. It argues that there is no reversibility in the growing reliance on such schemes and asks whether current and forthcoming proposals are necessary and original. It outlines the main challenges raised by the proposals, including issues related to the right to data protection, but also to privacy and non-discrimination.

Trends and gaps in the academic literature on EU labour migration policies. CEPS Paper in Liberty and Security No. 50/December 2012

This paper provides an overview of the ‘state of the art’ in the academic literature on EU labour migration policies. It forms part of the research agenda of Work Package 18 of the NEUJOBS project, which aims at reviewing legislation and practices regarding the labour market inclusion and protection of rights of different categories of foreign workers in European labour markets. Accordingly, particular attention is paid to the works of scholars who evaluate the status of rights of third-country national workers in relation to labour market access, employment security, social integration, etc., in European legislation on labour immigration. More specifically, the review has selected those scholarly works that focus specifically on analysing the manner in which policy-makers have addressed the granting of rights to non-EU migrant workers, and the manner in which policy agendas – through the relevant political and institutional dynamics – have found their translation in the legislation adopted. This paper consists of two core parts. In the first section, it reviews the works of scholars who have touched on these research questions with respect to the internal dimensions of EU labour migration policies. The second section does the same for the external dimensions of these policies. Both sections start off by analysing the main trends in the literature that reviews these questions for the internal and external dimensions of European migration policies as a whole, and then move on to how these ‘trends’ can (or cannot) be found translated in scholarly writings on labour migration policies more specifically. In the final section, the paper concludes by summarising the main trends and gaps in the literature reviewed, and indicates avenues for further research.

Does the Stockholm Programme matter? The struggles over ownership of AFSJ multiannual programming. CEPS Paper in Liberty and Security No. 51/December 2012

Does the 2009 Stockholm Programme matter? This paper addresses the controversies experienced at EU institutional levels as to ‘who’ should have ownership of the contours of the EU’s policy and legislative multiannual programming in the Area of Freedom, Security and Justice (AFSJ) in a post-Lisbon Treaty landscape. It examines the struggles around the third multiannual programme on the AFSJ, i.e. the Stockholm Programme, and the dilemmas affecting its implementation. The latest affair to emerge relates to the lack of fulfilment by the European Commission of the commitment to provide a mid-term evaluation of the Stockholm Programme’s implementation by mid-2012, as requested by both the Council and the European Parliament. This paper shifts the focus to a broader perspective and raises the following questions: Is the Stockholm Programme actually relevant? What do the discussions behind its implementation tell us about the new institutional dynamics affecting European integration on the AFSJ? Does the EU actually need a new (post- Stockholm) multiannual programme for the period 2015–20? And last, what role should the EP play in legislative and policy programming in order to further strengthen the democratic accountability and legitimacy of the EU’s AFSJ?

No need for a master plan from Brussels. CEPS Commentary, 7 January 2013

Taking exception with the often-heard bromide that Europe needs more integration to save its social model, Daniel Gros reiterates his position in this new CEPS Commentary that faster economic and population growth are key to ensuring the future of Europe’s social security systems.

Forest Policy Scenario Analysis: Sensitivity of Songbird Community to Changes in Forest Cover Amount and Configuration

Changes in mature forest cover amount, composition, and configuration can be of significant consequence to wildlife populations. The response of wildlife to forest patterns is of concern to forest managers because it lies at the heart of such competing approaches to forest planning as aggregated vs. dispersed harvest block layouts. In this study, we developed a species assessment framework to evaluate the outcomes of forest management scenarios on biodiversity conservation objectives. Scenarios were assessed in the context of a broad range of forest structures and patterns that would be expected to occur under natural disturbance and succession processes. Spatial habitat models were used to predict the effects of varying degrees of mature forest cover amount, composition, and configuration on habitat occupancy for a set of 13 focal songbird species. We used a spatially explicit harvest scheduling program to model forest management options and simulate future forest conditions resulting from alternative forest management scenarios, and used a process-based fire-simulation model to simulate future forest conditions resulting from natural wildfire disturbance. Spatial pattern signatures were derived for both habitat occupancy and forest conditions, and these were placed in the context of the simulated range of natural variation. Strategic policy analyses were set in the context of current Ontario forest management policies. This included use of sequential time-restricted harvest blocks (created for Woodland caribou (Rangifer tarandus) conservation) and delayed harvest areas (created for American marten (Martes americana atrata) conservation). This approach increased the realism of the analysis, but reduced the generality of interpretations. We found that forest management options that create linear strips of old forest deviate the most from simulated natural patterns, and had the greatest negative effects on habitat occupancy, whereas policy options that specify deferment and timing of harvest for large blocks helped ensure the stable presence of an intact mature forest matrix over time. The management scenario that focused on maintaining compositional targets best supported biodiversity objectives by providing the composition patterns required by the 13 focal species, but this scenario may be improved by adding some broad-scale spatial objectives to better maintain large blocks of interior forest habitat through time.

Human exposure modelling for chemical risk assessment: a review of current approaches and research and policy implications

A wide variety of exposure models are currently employed for health risk assessments. Individual models have been developed to meet the chemical exposure assessment needs of Government, industry and academia. These existing exposure models can be broadly categorised according to the following types of exposure source: environmental, dietary, consumer product, occupational, and aggregate and cumulative. Aggregate exposure models consider multiple exposure pathways, while cumulative models consider multiple chemicals. In this paper each of these basic types of exposure model are briefly described, along with any inherent strengths or weaknesses, with the UK as a case study. Examples are given of specific exposure models that are currently used, or that have the potential for future use, and key differences in modelling approaches adopted are discussed. The use of exposure models is currently fragmentary in nature. Specific organisations with exposure assessment responsibilities tend to use a limited range of models. The modelling techniques adopted in current exposure models have evolved along distinct lines for the various types of source. In fact different organisations may be using different models for very similar exposure assessment situations. This lack of consistency between exposure modelling practices can make understanding the exposure assessment process more complex, can lead to inconsistency between organisations in how critical modelling issues are addressed (e.g. variability and uncertainty), and has the potential to communicate mixed messages to the general public. Further work should be conducted to integrate the various approaches and models, where possible and regulatory remits allow, to get a coherent and consistent exposure modelling process. We recommend the development of an overall framework for exposure and risk assessment with common approaches and methodology, a screening tool for exposure assessment, collection of better input data, probabilistic modelling, validation of model input and output and a closer working relationship between scientists and policy makers and staff from different Government departments. A much increased effort is required is required in the UK to address these issues. The result will be a more robust, transparent, valid and more comparable exposure and risk assessment process. (C) 2006 Elsevier Ltd. All rights reserved.

Nitrate transport in Chalk catchments: monitoring, modelling and policy implications

Rising nitrate levels have been observed in UK Chalk catchments in recent decades, with concentrations now approaching or exceeding legislated maximum values in many areas. In response, strategies seeking to contain concentrations through appropriate land management are now in place. However, there is an increasing consensus that Chalk systems, a predominant landscape type over England and indeed northwest Europe, can retard decades of prior nitrate loading within their deep unsaturated zones. Current levels may not fully reflect the long-term impact of present-day practices, and stringent land management controls may not be enough to avert further medium-term rises. This paper discusses these issues in the context of the EU Water Framework Directive, drawing on data from recent experimental work and a new model (INCA-Chalk) that allows the impacts of different land use management practices to be explored. Results strongly imply that timelines for water quality improvement demanded by the Water Framework directive are not realistic for the Chalk, and give an indication of time-scales over which improvements might be achieved. However, important unresolved scientific issues remain, and further monitoring and targeted data collection is recommended to reduce prediction uncertainties and allow cost effective strategies for mitigation to be designed and implemented. (C) 2007 Elsevier Ltd. All rights reserved.

Robust dynamics of Amazon dieback to climate change with perturbed ecosystem model parameters

Climate change science is increasingly concerned with methods for managing and integrating sources of uncertainty from emission storylines, climate model projections, and ecosystem model parameterizations. In tropical ecosystems, regional climate projections and modeled ecosystem responses vary greatly, leading to a significant source of uncertainty in global biogeochemical accounting and possible future climate feedbacks. Here, we combine an ensemble of IPCC-AR4 climate change projections for the Amazon Basin (eight general circulation models) with alternative ecosystem parameter sets for the dynamic global vegetation model, LPJmL. We evaluate LPJmL simulations of carbon stocks and fluxes against flux tower and aboveground biomass datasets for individual sites and the entire basin. Variability in LPJmL model sensitivity to future climate change is primarily related to light and water limitations through biochemical and water-balance-related parameters. Temperature-dependent parameters related to plant respiration and photosynthesis appear to be less important than vegetation dynamics (and their parameters) for determining the magnitude of ecosystem response to climate change. Variance partitioning approaches reveal that relationships between uncertainty from ecosystem dynamics and climate projections are dependent on geographic location and the targeted ecosystem process. Parameter uncertainty from the LPJmL model does not affect the trajectory of ecosystem response for a given climate change scenario and the primary source of uncertainty for Amazon 'dieback' results from the uncertainty among climate projections. Our approach for describing uncertainty is applicable for informing and prioritizing policy options related to mitigation and adaptation where long-term investments are required.

A model-based assessment of the effects of projected climate change on the water resources of Jordan

This paper is concerned with the quantification of the likely effect of anthropogenic climate change on the water resources of Jordan by the end of the twenty-first century. Specifically, a suite of hydrological models are used in conjunction with modelled outcomes from a regional climate model, HadRM3, and a weather generator to determine how future flows in the upper River Jordan and in the Wadi Faynan may change. The results indicate that groundwater will play an important role in the water security of the country as irrigation demands increase. Given future projections of reduced winter rainfall and increased near-surface air temperatures, the already low groundwater recharge will decrease further. Interestingly, the modelled discharge at the Wadi Faynan indicates that extreme flood flows will increase in magnitude, despite a decrease in the mean annual rainfall. Simulations projected no increase in flood magnitude in the upper River Jordan. Discussion focuses on the utility of the modelling framework, the problems of making quantitative forecasts and the implications of reduced water availability in Jordan.

Assessing the impact of the 'Decoupling' reform of the common agricultural policy on Irish farmers' off-farm labour market participation decisions

This paper assesses the impact of the 'decoupling' reform of the Common Agricultural Policy on the labour allocation decisions of Irish farmers. The agricultural household decision-making model provides the conceptual and theoretical framework to examine the interaction between government subsidies and farmers' time allocation decisions. The relationship postulated is that 'decoupling' of agricultural support from production would probably result in a decline in the return to farm labour but it would also lead to an increase in household wealth. The effect of these factors on how farmers allocate their time is tested empirically using labour participation and labour supply models. The models developed are sufficiently general for application elsewhere. The main findings for the Irish situation are that the decoupling of direct payments is likely to increase the probability of farmers participating in the off-farm employment market and that the amount of time allocated to off-farm work will increase.

Policy options promoting market participation among smallholder livestock producers: a case study from the Phillipines

We investigate the factors precipitating market entry where smallholders make decisions about participation (a discrete choice about whether to sell quantities of products) and supply (a continuous-valued choice about how much quantity to sell) in a cross-section of smallholders in Northern Luzon, Philippines, in a model that combines basic probit and Tobit ideas, is implemented using Bayesian methods, and generates precise estimates of the inputs required in order to effect entry among the non-participants. We estimate the total amounts of (cattle, buffalo, pig and chicken) livestock input required to effect entry and compare and contrast the alternative input requirements. To the extent that our smallholder sample may be representative of a wide and broader set of circumstances, our findings shed light on offsetting impacts of conflicting factors that complicate the roles for policy in the context of expanding the density of participation.