Thematic Platform "European Union"

EU governance, budget and tax policy

WIFO Working Papers, 2018, (562), 43 pages
Online since: 20.04.2018 0:00
The New View on fiscal policy (as coined by Furman 2016) represents a rethinking of the main-stream consensus on the optimal macroeconomic policy mix. It focuses on a reassessment of the relative effectiveness of fiscal policy and its ability to stabilise the economy when monetary policy reaches its limit. This paper aims to present in detail the main principles of the New View as proposed by Furman (2016), to extend them, bring additional theoretical and empirical evidence, as well as concrete policy implications for the architecture of the European Monetary Union. The New View builds upon five core principles: Firstly, fiscal policy is a significant and efficient complement to monetary policy at the zero lower bound on theoretical grounds. Secondly, we take a closer look at the empirical evidence on government spending multipliers in a recession, both in the DSGE and in the VAR literature, and show it points to much higher multipliers than in normal times. Thirdly, we provide evidence to why fiscal space is actually higher than normally perceived in a recession, because fiscal stimuli can pay for themselves by enhancing current growth and potential output. We shortly discuss whether it is not better to have a sustained stimulus rather than a short one and whether enhanced global spillover effects in an environment of insufficient aggregate demand further enhance fiscal policy effectiveness. All of the above arguments point to the welfare enhancing effects of fiscal stimulus during a zero lower bound episode and that an approach, led by the New View, would have delivered better macroeconomic outcomes during the Eurozone crisis. We then discuss what such an approach could mean for a more resilient EMU architecture and for stabilisation mechanisms in the Euro Area.
Intereconomics – Review of European Economic Policy, 2019, (3), pp.171-177,
In the current negotiations about the European Union's next medium-term Multiannual Financial Framework (MFF) for the period 2021 to 2027, the system of own resources financing EU expenditures plays a relatively important role. Currently, the EU budget primarily rests on contributions from Member States (VAT- and GNI-based own resources), whereas "true" own resources have continuously lost importance. In 2017, VAT-based own resources accounted for 12.2 percent of overall EU revenues and GNI-based own resources for 56.6 percent, while traditional own resources contributed the rather small share of 14.7 percent.

Labour market and social policy

Monographs, June 2018, 24 pages
Commissioned by: Chamber of Labour: Vienna
Study by: Austrian Institute of Economic Research
Online since: 20.06.2018 0:00
The report is an update of a set of labour market indices first developed and tested in 2010 in collaboration with experts of the Vienna Chamber of Labour (AK). The Austrian labour market is examined relative to the other 27 EU countries according to the following key dimensions: overall labour market performance, participation of different groups of people, exclusion risks on the labour market, distribution of earnings and redistribution by the welfare state. The present report summarises the current results of the five dimensions and contains a cartographic overview.
Die Ereignisse seit dem Ausbruch der Großen Rezession haben gezeigt, dass die soziale Dimension der EU eine entscheidende Bedeutung für die Stabilität und politische Legitimation der EU einnimmt. Der vorliegende Beitrag untersucht die Rolle und das Potential der sozialinvestiven Perspektive auf den Wohlfahrtsstaat für die Weiterentwicklung des europäischen Integrationsprojekts. Dazu werden in einem ersten Schritt die Kerngedanken dieses sozialpolitischen Ansatzes erläutert und ihre Bedeutung mit Blick auf die EU und insbesondere auf die Währungsunion beleuchtet. In einem zweiten Schritt wird analysiert, in welcher Form und in welchem Ausmaß der sozialinvestive Ansatz im politischen Prozess der EU verankert ist, wobei der Fokus auf den jüngsten Entwicklungen und Initiativen liegt.

Regional disparities and structural change

This paper analyses the impact of the European Union's Cohesion Policy on firm growth in the programming period 2007-2013 in seven European countries. Results show that Cohesion Policy support promotes firm growth in size (value added and employment) more than in productivity. However, even when the policy is the same and similar projects and beneficiaries are considered, its effectiveness varies across different territorial contexts, among but also within countries. In several cases, the impact of grants on firm growth is larger in regions with lower income or scant endowments of territorial assets, most likely because firms in those regions cannot rely on external assets.

Competitiveness and innovation

Klaus S. Friesenbichler (Project co-ordinator), Christian Glocker, Werner Hölzl, Serguei Kaniovski, Agnes Kügler, Andreas Reinstaller, Gerhard Streicher (WIFO), Iulia Siedschlag, Mattia Di Ubaldo, Zuzanna Studnicka (ESRI), Robert Stehrer, Roman Stöllinger, Sandra Leitner, Doris Hanzl-Weiss, Oliver Reiter, Amat Adarov, Alexandra Bykova (wiiw)
Monographs, December 2017, 367 pages
Commissioned by: European Commission
Study by: Austrian Institute of Economic Research – Economic and Social Research Institute – The Vienna Institute for International Economic Studies
Online since: 08.01.2018 0:00
This report offers an extensive analysis of the effects of the EU Single Market. It sheds light on four interrelated aspects: It first reveals the asymmetric economic performance across member countries, which also mirrors structural differences. These differences in economic outcomes are next confronted with measures of the Single Market, economic institutions, changes in demand patterns, industrial turbulence and producer price developments. Next, the changes in value chains are tracked over time, and also put into a global perspective. Eventually, firm level evidence complements the findings. The results are highly relevant for economic policies at the member country and the EU level.
Monographs, July 2016, 227 pages
Commissioned by: European Commission, DG Growth
Study by: Austrian Institute of Economic Research – National Institute of Economic and Social Research, London
Online since: 21.11.2016 0:00
This study analyses the main transmission mechanisms relevant for the absorption and propagation of asymmetries within the EU and EMU, putting a specific focus on Europe's real economy. In particular, the report aims to assess how the economic shock that triggered the financial and economic crisis has been transmitted and at least partially absorbed in the EU's real economy and the EMU member countries, from both a macro- and a microeconomic perspective. From a policy point of view, the results of the current study imply that, on account of the substantial heterogeneity among EU countries found in all parts of the study, "one size fit all" policies are likely to be very ineffective at increasing the resilience of the EU's single market.

Climate, energy and environmental policy

in: Larry Kreiser, Soocheol Lee, Kazuhiro Ueta, Janet E. Milne, Hope Ashiabor (Eds.), Environmental Taxation and Green Fiscal Reform
Book chapters, contributions to collected volumes, Edward Elgar Publishing, Cheltenham, January 2014, pp.113-125
Online since: 21.04.2015 11:45
in: Stefan E. Weishaar, Janet E. Milne, Larry Kreiser, Hope Ashiabor, Michael Mehling (Eds.), The Green Market Transition
Critical Issues in Environmental Taxation, 2017, (19),

Impact evaluation

Monographs, September 2017, 59 pages
Commissioned by: European Parliament
Study by: Austrian Institute of Economic Research – Kiel Institute for the World Economy
Online since: 10.10.2017 0:00
This report summarises empirical facts about the economic impact of the EU sanctions against Russia and the Russian countersanctions, both implemented in the summer of 2014. The observed decline in trade volumes between the EU and Russia is not only due to the sanctions, but also by other economic factors, such as the downturn of the Russian economy, largely caused by the falling oil price and the ensuing ruble depreciation. Furthermore, empirical evidence suggests that European and Russian companies alike managed to partly divert trade flows to other international markets in response to the deteriorating trade relationships. Overall trade diversion, however, cannot nearly compensate for losses of EU exports to Russia and thus mitigate the economy-wide negative impacts. Finally, descriptive evidence and additional information seem to indicate that compliance with the sanctions was partly circumvented right after the implementation of the sanctions in 2014, in particular for agri-food goods via countries of the Eurasian Economic Union. Legal trade diversion through countries unaffected by the sanctions has also taken place. It is important to emphasise that this study does not assess the political costs or effectiveness of the sanctions, but merely analyses potential economic costs caused by all sanction measures in place.
This paper proposes a new panel data structural gravity approach for estimating the trade and welfare effects of Brexit. The suggested Constrained Poisson Pseudo Maximum Likelihood Estimator exhibits some useful properties for trade policy analysis and allows to obtain estimates and confidence intervals which are consistent with structural trade theory. Assuming different counterfactual post-Brexit scenarios, our main findings suggest that UK's exports of goods to the EU are likely to decline within a range between 7.2 percent and 45.7 percent (EU's exports to UK by 5.9 percent to 38.2 percent) six years after the Brexit has taken place. For the UK, the negative trade effects are only partially offset by an increase in domestic goods trade and trade with third countries, inducing a decline in UK's real income between 1.4 percent and 5.7 percent under the hard Brexit scenario. The estimated welfare effects for the EU are negligible in magnitude and statistically not different from zero.