The paper aims to assess the impact of selected elements of social harmonization on labor market performance in the European Union among two groups of workers—the total working population and the elderly. The aim is to examine whether upward changes in labor taxes affect employment, unemployment, and inactivity rates in the European Union.
The purpose of this study is to explore and assess the costs and benefits of labour migration in Armenia and the potential of migration for contributing to the country’s development. We also examine how policy can be effectively formulated and implemented so that Armenia can get the most out of its migration experience. Lastly, we analyse how a phenomenon that emerged because of limited opportunities for employment – migration – evolved into a strategy towards development and prosperity.
Based on this analysis, this paper makes a strong argument in favour of implementing programs in Armenia that involve the active collaboration of government institutions and the Armenian Diaspora, duly considering the unusual influence the latter has on Armenia’s economic and human development.
Authored by: Gagik Makaryan and Mihran Galstyan
Published in 2013
In recent years, external links of the Republic of Moldova have been determined by the influence of two geopolitical blocks, the Commonwealth of Independent States (CIS) and the European Union (EU). Moldova is currently a member of the CIS, largely as a result of historical economic and political ties. However, despite the strong ties with the CIS, relations with the EU are becoming increasingly important particularly with regard to the economic situation in the country. Following the 2007 EU enlargement, Moldova will directly border the EU community, as a result of the border with Romania, making strong relations with the EU even more important. Further, there are a large number of inhabitants of Moldova who possess Romanian passports which will necessitate increased Moldova- EU cooperation.
This study analyses the current situation in Moldova and presents scenarios for future economic integration of Moldova with the European Union. It is expected that these findings will be used in the formulation of Moldovan economic policy, particularly while drafting the next framework agreement with the EU.
Authored by: Maria Cernobrovciuc, Malgorzata Jakubiak, Joanna Konieczna, Mariana Puntea, Marcin Sowa, Alexandru Stratulat
This Report is one of six studies in the first phase of the EU project on “Costs and Benefits of Labour Mobility between the EU and the Eastern Partnership Partner Countries.” It aims to provide an informed view on the potential for increased migration flows and their consequences as a result of possible changes in the migration policies of the European Union with regard to Moldova. Since Moldova’s Declaration of Independence in 1990, migration has transformed the country in ways that were impossible to predict. With over a quarter of its labour force now working abroad (a full ten percent of its population), Moldova has become the epitome of a migration-dependent country, with all the costs and benefits associated with this definition. Remittances are as high as one-third of national income, and have helped the country raise its living standards and fuel investment in housing and small businesses. Yet there have also been costs to the large migratory flows, ranging from effects on the macroeconomy to the disruption of social life. All in all, migration has been good for Moldova. This complex socio-economic phenomenon now appears to have stabilized. Further gains for Moldova and its partner countries could be achieved when new agreements are implemented and the institutions dealing with the planning of migration and protection of migrants are strengthened.
Authored by: Georgeta Mincu, Vasile Cantarji
Published in 2013
This report presents the methodology for the construction of the Financial Stress Index (FSI) and the Economic Sensitivity Index (ESI) and investigates the economic situation in twelve Central and East European Countries (CEECs) between 2001 and 2012. The objective of this paper was to capture key features of financial and economic vulnerability and examine the co-movement of economic turmoil and financial disturbances that strongly affected the CEECs in the last decade. The main finding is that the FSI can be used as a leading indicator and can be used to recognize changing trends in the index. A shift in the value of the index proves that EU accession has a positive, but minor influence on financial stability in the CEECs. On the other hand, the impact of the introduction of the euro in Estonia, Slovakia and Slovenia is ambiguous.
For most of the countries in our sample, the FSI started to grow rapidly in 2007, reaching its peak around the third quarter of 2008. Consequently, financial stress remained high for a few quarters and started to fall gradually. For a number of countries, we observe higher financial stress in the latest period of our analysis, i.e. 2010-2012. However, the value of the FSI was significantly lower than three years earlier.
The results show that indices might be helpful in predicting future recessions. Consequently, the model will be expanded by adding a forecasting module, the launch of which is planned for April 2014.
Written by Maciej Krzak and Grzegorz Poniatowski. Published in January 2014
PDF available on our website at: http://www.case-research.eu/en/node/58411
The projection examines impact of demographic changes and changes in health status on future (up to 2050) health expenditures. Next to it, future changes in the labour market participation and their impact on the health care system revenues are examined. Impact of demography on the health care system financial balanced is examined in four different scenarios: baseline scenario, death-related costs scenario, different longevity scenario and diversified employment rates scenario. Results indicate dynamic and systematic increase of the health expenditures in the next 30 years. Afterwards the dynamics of this process is foreseen to slow down. Despite the increase of the revenues of the health care system, the system will face deficit in the close future. This holds for each scenario, however the size of the deficit differs depending on longevity and labour market participation assumptions. Results lead to a discussion on possible reforms of the health care system.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2008
In the last decade, advanced economies, including the euro area, experienced deflationary pressures caused by the global financial crisis of 2007-2009 and the anti-crisis policies that followed—in particular, the new financial regulations (which led to a deep decline in the money multiplier). However, there are numerous signs in both the real and financial spheres that these pressures are disappearing. The largest advanced economies are growing up to their potential, unemployment is systematically decreasing, the financial sector is more eager to lend, and its clients—to borrow. Rapidly growing asset prices signal the possibility of similar developments in other segments of the economy. In this new macroeconomic environment, central banks should cease unconventional monetary policies and prepare themselves to head off potential inflationary pressures.
The purpose of this study is to analyze the course, determinants and political economy of economic reforms in Russia conducted in the period 1985-2003. The year 1985 can be considered an important turning point in Soviet/Russian history, marked as it was by the election of Mikhail Gorbachev to the position of General Secretary of the Communist Party of Soviet Union (CPSU) and (de facto) leader of the USSR. This nomination brought an end to two decades of political consolidation of the communist regime connected with the name of General Secretary Leonid Brezhnev and his short-living successors (Yurii Andropov and Konstantin Chernenko), often referred to ex post as 'the stagnation period' (vremya zastoya). Gorbachev initiated a series of important political and (to a lesser extent) economic reforms, which led eventually to the collapse of the communist regime and the disintegration of the Soviet empire in 1991. Thus, 1991 must be seen as another dramatic turning point in Russia's contemporary history. From the end of 1991 onwards political and economic reforms have been carried out by the new Russian state that emerged after the disintegration of the USSR. This paper aims to explain the political and institutional determinants of economic reforms in the Russian Federation.
Authored by: Rafal Antczak, Marek Dabrowski, Vladimir Mau, Aleksey Shapovalov, Irina Sinitsina, Konstantin Yanovskiy, Sergei Zhavoronkov
Published in 2004
The purpose of this study is to explore and assess the costs and benefits of labour migration in Armenia and the potential of migration for contributing to the country’s development. We also examine how policy can be effectively formulated and implemented so that Armenia can get the most out of its migration experience. Lastly, we analyse how a phenomenon that emerged because of limited opportunities for employment – migration – evolved into a strategy towards development and prosperity.
Based on this analysis, this paper makes a strong argument in favour of implementing programs in Armenia that involve the active collaboration of government institutions and the Armenian Diaspora, duly considering the unusual influence the latter has on Armenia’s economic and human development.
Authored by: Gagik Makaryan and Mihran Galstyan
Published in 2013
In recent years, external links of the Republic of Moldova have been determined by the influence of two geopolitical blocks, the Commonwealth of Independent States (CIS) and the European Union (EU). Moldova is currently a member of the CIS, largely as a result of historical economic and political ties. However, despite the strong ties with the CIS, relations with the EU are becoming increasingly important particularly with regard to the economic situation in the country. Following the 2007 EU enlargement, Moldova will directly border the EU community, as a result of the border with Romania, making strong relations with the EU even more important. Further, there are a large number of inhabitants of Moldova who possess Romanian passports which will necessitate increased Moldova- EU cooperation.
This study analyses the current situation in Moldova and presents scenarios for future economic integration of Moldova with the European Union. It is expected that these findings will be used in the formulation of Moldovan economic policy, particularly while drafting the next framework agreement with the EU.
Authored by: Maria Cernobrovciuc, Malgorzata Jakubiak, Joanna Konieczna, Mariana Puntea, Marcin Sowa, Alexandru Stratulat
This Report is one of six studies in the first phase of the EU project on “Costs and Benefits of Labour Mobility between the EU and the Eastern Partnership Partner Countries.” It aims to provide an informed view on the potential for increased migration flows and their consequences as a result of possible changes in the migration policies of the European Union with regard to Moldova. Since Moldova’s Declaration of Independence in 1990, migration has transformed the country in ways that were impossible to predict. With over a quarter of its labour force now working abroad (a full ten percent of its population), Moldova has become the epitome of a migration-dependent country, with all the costs and benefits associated with this definition. Remittances are as high as one-third of national income, and have helped the country raise its living standards and fuel investment in housing and small businesses. Yet there have also been costs to the large migratory flows, ranging from effects on the macroeconomy to the disruption of social life. All in all, migration has been good for Moldova. This complex socio-economic phenomenon now appears to have stabilized. Further gains for Moldova and its partner countries could be achieved when new agreements are implemented and the institutions dealing with the planning of migration and protection of migrants are strengthened.
Authored by: Georgeta Mincu, Vasile Cantarji
Published in 2013
This report presents the methodology for the construction of the Financial Stress Index (FSI) and the Economic Sensitivity Index (ESI) and investigates the economic situation in twelve Central and East European Countries (CEECs) between 2001 and 2012. The objective of this paper was to capture key features of financial and economic vulnerability and examine the co-movement of economic turmoil and financial disturbances that strongly affected the CEECs in the last decade. The main finding is that the FSI can be used as a leading indicator and can be used to recognize changing trends in the index. A shift in the value of the index proves that EU accession has a positive, but minor influence on financial stability in the CEECs. On the other hand, the impact of the introduction of the euro in Estonia, Slovakia and Slovenia is ambiguous.
For most of the countries in our sample, the FSI started to grow rapidly in 2007, reaching its peak around the third quarter of 2008. Consequently, financial stress remained high for a few quarters and started to fall gradually. For a number of countries, we observe higher financial stress in the latest period of our analysis, i.e. 2010-2012. However, the value of the FSI was significantly lower than three years earlier.
The results show that indices might be helpful in predicting future recessions. Consequently, the model will be expanded by adding a forecasting module, the launch of which is planned for April 2014.
Written by Maciej Krzak and Grzegorz Poniatowski. Published in January 2014
PDF available on our website at: http://www.case-research.eu/en/node/58411
The projection examines impact of demographic changes and changes in health status on future (up to 2050) health expenditures. Next to it, future changes in the labour market participation and their impact on the health care system revenues are examined. Impact of demography on the health care system financial balanced is examined in four different scenarios: baseline scenario, death-related costs scenario, different longevity scenario and diversified employment rates scenario. Results indicate dynamic and systematic increase of the health expenditures in the next 30 years. Afterwards the dynamics of this process is foreseen to slow down. Despite the increase of the revenues of the health care system, the system will face deficit in the close future. This holds for each scenario, however the size of the deficit differs depending on longevity and labour market participation assumptions. Results lead to a discussion on possible reforms of the health care system.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2008
In the last decade, advanced economies, including the euro area, experienced deflationary pressures caused by the global financial crisis of 2007-2009 and the anti-crisis policies that followed—in particular, the new financial regulations (which led to a deep decline in the money multiplier). However, there are numerous signs in both the real and financial spheres that these pressures are disappearing. The largest advanced economies are growing up to their potential, unemployment is systematically decreasing, the financial sector is more eager to lend, and its clients—to borrow. Rapidly growing asset prices signal the possibility of similar developments in other segments of the economy. In this new macroeconomic environment, central banks should cease unconventional monetary policies and prepare themselves to head off potential inflationary pressures.
The purpose of this study is to analyze the course, determinants and political economy of economic reforms in Russia conducted in the period 1985-2003. The year 1985 can be considered an important turning point in Soviet/Russian history, marked as it was by the election of Mikhail Gorbachev to the position of General Secretary of the Communist Party of Soviet Union (CPSU) and (de facto) leader of the USSR. This nomination brought an end to two decades of political consolidation of the communist regime connected with the name of General Secretary Leonid Brezhnev and his short-living successors (Yurii Andropov and Konstantin Chernenko), often referred to ex post as 'the stagnation period' (vremya zastoya). Gorbachev initiated a series of important political and (to a lesser extent) economic reforms, which led eventually to the collapse of the communist regime and the disintegration of the Soviet empire in 1991. Thus, 1991 must be seen as another dramatic turning point in Russia's contemporary history. From the end of 1991 onwards political and economic reforms have been carried out by the new Russian state that emerged after the disintegration of the USSR. This paper aims to explain the political and institutional determinants of economic reforms in the Russian Federation.
Authored by: Rafal Antczak, Marek Dabrowski, Vladimir Mau, Aleksey Shapovalov, Irina Sinitsina, Konstantin Yanovskiy, Sergei Zhavoronkov
Published in 2004
This report presents and discusses the findings of the “Study to quantify and analyse the VAT Gap in the EU-27 Member States”, conducted by CASE and CPB. The main aim of the study was to help better understand the recent trends in the field of VAT fraud and analyse determinants of VAT Gaps using a number of econometric techniques. The authors discuss the structure of the VAT systems in the EU, the broad trends in the EU economy over the period 2000-2011, and review the behaviour of VAT revenues, as well as the changes in VAT rates and exemptions that have occurred as a response to economic events or policy decisions. They pay particular attention to the events following the onset of the economic crisis in 2008. Moreover, they discuss the definition of VAT Gaps that has been used in this study, as well as other alternatives existing in the literature. They review possible shortcomings associated with different concepts. Subsequently, they present the results of the estimations for EU-26 countries for the period 2000-2011. The estimates are first discussed for the EU-26 as a whole, and then for each country individually. Finally, an econometric analysis of the determinants of VAT Gaps for the period under consideration is provided.
Written by Luca Barbone, Misha V. Belkindas, Leon Bettendorf, Richard M. Bird, Michael Smart and Mikhail Bonch-Osmolovsky. Published in December 2013
PDF available on our website at: http://www.case-research.eu/en/node/58372
In the report, the authors present an insight of the socio-economic drivers of economic and noneconomic activity of persons 50+, as well as their ability to adopt to SET. Not only the labour market participation, but also social engagement, beliefs, education, religious activities and housework are studied. With the use of European Social Survey data they investigate the general level of the activity among people aged 50+ in Europe as well as the relation between various aspects of activity and general labour market performance. They obtain mixed results on the concomitance of non-market and labour-market activities. At the same time they check the role of personal traits as well as pull and push factors on prematurely leaving labour market in European countries. The differences among countries in terms of the results are confronted with the institutional characteristics of the countries. Finally, selected case studies of successful activation policies are presented.
The report was released within a project NEUJOBS- “The Impact of Service Sector Innovation and Internationalisation on Growth and Productivity”, funded by the European Commission, Research Directorate General as part of the 7th Framework Programme.
Written by Izabela Styczynska, Maciej Lis, Aart Jan Riekhoff and Agnieszka Kaminska. Published in October 2013.
PDF available on our website at: http://www.case-research.eu/en/node/58346
This study includes an evaluation of the fiscal effects of privatization in both countries in the period since the very beginning of the process, i.e. in the case of Poland since 1990 and in the case of Bulgaria since 1993. The crosscountry comparison of the fiscal dimension of privatization has been contingent on the privatization models, priorities and methods applied in both countries.
Authored by: Michal Gorzynski, Julian Pankow, Krassen Stanchev, Georgi Stoev, Mateusz Walewski, Assenka Yonkova
Published in 2000
Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland.
Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market.
The authors evaluate the effects of potential measures to liberalize trade between the EU and the CIS using a computable general equilibrium (CGE) model. They look at the CIS as an aggregate and we also present results for individual CIS countries. Their CGE model takes different underlying industry specific market structures and elasticities into account. Furthermore, the model incorporates estimated non-tariff trade barriers to trade in services. The results are compared to a baseline which incorporates recent developments in the trade policy environment, i.e. the phase out of ATC, enlargement of the EU and CIS accessions to the WTO. The analysis takes agricultural liberalization, liberalization in industrial tariffs, and liberalization in services trade as well as trade facilitation measures into account. While there is important heterogeneity in the impact of FTAs on individual countries, the results indicate that the CIS as a whole would experience a negative income effect if the FTA would be limited only to trade in goods. This implies that the CIS would most likely to benefit from an FTA with the EU if it would incorporate deeper form of integration not being limited to liberalization of tariffs in goods.
Authored by: Joseph Francois, Miriam Manchin
Published in 2009
Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Current report aims to identify major existing gaps in the four socio-economic dimensions (economic, human, environmental, and institutional) and to reveal those gaps which could potentially hinder social and economic integration of neighbor states with the EU. To achieve this, the authors aim to assess the existing trends in the size of the gaps across countries and problem areas, taking into consideration the specific origin of the gap between EU15/EU12, on the one hand, and FSU republics, EU candidates and West Balkan countries, on the other hand.
Authored by: Alexander Chubrik, Irina Denisova, Vladimir Dubrovskiy, Marina Kartseva, Irina Makenbaeva, Magdalena Rokicka, Irina Sinitsina, Michael Tokmazishvili
Published in 2007
Labour migration does not appear to have the same magnitude and socio-economic importance in Belarus as in other EaP countries. It is one of the few post-socialist economies that have preserved the dominance of the state sector and built complicated systems of subsidisation and economic support for the population designed to manage the political-business cycle (see Chubrik, Shymanovich, Zaretsky (2012)). This model has allowed the economy to grow quite steadily until recently. However, the distorted system of incentives that was created for enterprises and households has resulted in the need for a “correction”, which happened in the form of a balance of payments crisis in 2011. The impact of this factor on migration has not been fully visible yet. At the same time the relatively long period of stability and gradual, but steady, increase in welfare payments has played a role as a migration-restraining factor. In order to estimate cost and benefits of labour migration between EU and Belarus, this study utilises publically available literature as background and relies where possible on micro-data: Census-2009, Household Budget Survey (HBS), as well as relevant official data and data from polls related to the topic. Additionally, some sections of this report rely on information collected in the course of a focus group meeting with labour migrants and a series of in-depth interviews with officials from state, international, and non-governmental agencies dealing with migration. Lastly, in some cases anecdotal evidence was collected to support some of the new trends that have not yet been recorded in the statistics.
Authored by: Alexander Chubrik and Alaksei Kazlou
The ILO and the informal sector: an institutional historyDr Lendy Spires
To learn from history, we must know it. Over the past three decades, the ILO has been both the midwife and the principal international institutional home for the concept of the informal sector. As we enter the next millennium, with a new Director General and a refocused mandate on “decent work” and an increased emphasis on to the marginalised and the excluded, it seems timely to pause and look back.
Over these past thirty odd years, how has this institution wrestled with the informal sector, both as a concept and as a painful reality for our constituents? Where did this concept come from? How has the ILO dealt with it over the years, with what successes ... and what failures? Despite these three decades of work, the informal sector is still a topic which elicits diverging views, sometimes passionately so, about how to define it, how to measure and to classify it, and especially about how to respond to it. There is even debate on what to call it. There is little divergence now, however, that the informal sector exists and will be with us for the foreseeable future.
This consensus is in large measure the result of these three decades of ILO’s effort both to develop the concept of the informal sector and to implant it into the development paradigm. In this paper, I focus on recording the institutional history of this effort rather than on the concept itself. The concept of the informal sector has itself evolved over these years. My intention, however, is neither to trace that conceptual evolution nor to explore its current state. That is a sufficiently broad topic on its own to merit taking up separately. In this paper, I concentrate on the bureaucratic or institutional history of the ILO and the informal sector.
How did the International Labour Office, as a large international and also bureaucratic institution (with both the strengths and the weaknesses these characteristics entail) respond to a concept and an economic reality which is both central to the institution’s core mandate of social justice and at the same time foreign to its traditionally understood tripartite constituency and institutional culture? The “official record” of an institution is just the skeleton of its history. Each officially recorded event is done (or left undone), supported (or opposed) by real people. An institutional history, then, should also include this sometimes collaborative and sometimes conflictual but always complex human interaction of the people actually involved in these events. In the following pages, I have tried to provide an account not just of the official events by the formal institutional ILO, but also some of the human environment and the professional context within which these events took place.
For some of these, I was a participant; for many others, they happened “just down the hall” and I knew personally the officials who were involved. So what follows includes an element of personal memoir.
The Stockholm Institute of Transition Economics (SITE) has the pleasure to invite you to a presentation on Friday January 25, 12.00 – 14.00 with Maurizio Bussolo, lead economist in Europe and Central Asia Chief Economist Office at the World Bank.
For more information please follow the link:
This paper provides an overview of public expenditures on education and healthcare in Belarus, Georgia, Kyrgyzstan, Moldova, Russia, Ukraine and some other countries of the former Soviet Union before and during the global financial crisis. Before the crisis, the governments of these countries were substantially increasing spending on education and health. The crisis adversely affected the FSU countries and worsened their fiscal situation. The analysis indicates that during the crisis, despite the fiscal constraints, public education and health expenditures have mostly been maintained or increased in almost all of these countries. However, the crisis situation was not taken as an opportunity to address these countries' key education and healthcare problems related to demographic changes, insufficient per capita expenditure levels, the low efficiency of public spending and the insufficient quality of services. These issues form an ambitious reform agenda for these countries in the medium- and long-term.
Authored by: Alexander Chubrik, Marek Dabrowski, Roman Mogilevsky, Irina Sinitsina
Published in 2011
Ukraine is a migration-intensive country, with an estimated 1.5-2 million labour migrants (about 5% of the working-age population). Slightly over a half of these migrants travel for work to the EU. This study discusses the impact of this large pool of migrants on both the sending and receiving countries. It also assesses how liberalisation of the EU visa regime, something that the EU is currently negotiating with Ukraine, will affect the stream of Ukrainian labour migrants to EU countries. Our study suggests that the number of tourists will increase substantially, whereas the increase in the number of labour migrants is unlikely to be very large. We also suggest that the number of legal migrants is likely to increase, but at the same time the number of illegal migrants will decline because currently only a third of migrants from Ukraine have both residence and work permits in the EU, while about a quarter of them stay there illegally.
Authored by: Hannah Vakhitova and Tom Coupé
Published in 2013
This report presents and discusses the findings of the “Study to quantify and analyse the VAT Gap in the EU-27 Member States”, conducted by CASE and CPB. The main aim of the study was to help better understand the recent trends in the field of VAT fraud and analyse determinants of VAT Gaps using a number of econometric techniques. The authors discuss the structure of the VAT systems in the EU, the broad trends in the EU economy over the period 2000-2011, and review the behaviour of VAT revenues, as well as the changes in VAT rates and exemptions that have occurred as a response to economic events or policy decisions. They pay particular attention to the events following the onset of the economic crisis in 2008. Moreover, they discuss the definition of VAT Gaps that has been used in this study, as well as other alternatives existing in the literature. They review possible shortcomings associated with different concepts. Subsequently, they present the results of the estimations for EU-26 countries for the period 2000-2011. The estimates are first discussed for the EU-26 as a whole, and then for each country individually. Finally, an econometric analysis of the determinants of VAT Gaps for the period under consideration is provided.
Written by Luca Barbone, Misha V. Belkindas, Leon Bettendorf, Richard M. Bird, Michael Smart and Mikhail Bonch-Osmolovsky. Published in December 2013
PDF available on our website at: http://www.case-research.eu/en/node/58372
In the report, the authors present an insight of the socio-economic drivers of economic and noneconomic activity of persons 50+, as well as their ability to adopt to SET. Not only the labour market participation, but also social engagement, beliefs, education, religious activities and housework are studied. With the use of European Social Survey data they investigate the general level of the activity among people aged 50+ in Europe as well as the relation between various aspects of activity and general labour market performance. They obtain mixed results on the concomitance of non-market and labour-market activities. At the same time they check the role of personal traits as well as pull and push factors on prematurely leaving labour market in European countries. The differences among countries in terms of the results are confronted with the institutional characteristics of the countries. Finally, selected case studies of successful activation policies are presented.
The report was released within a project NEUJOBS- “The Impact of Service Sector Innovation and Internationalisation on Growth and Productivity”, funded by the European Commission, Research Directorate General as part of the 7th Framework Programme.
Written by Izabela Styczynska, Maciej Lis, Aart Jan Riekhoff and Agnieszka Kaminska. Published in October 2013.
PDF available on our website at: http://www.case-research.eu/en/node/58346
This study includes an evaluation of the fiscal effects of privatization in both countries in the period since the very beginning of the process, i.e. in the case of Poland since 1990 and in the case of Bulgaria since 1993. The crosscountry comparison of the fiscal dimension of privatization has been contingent on the privatization models, priorities and methods applied in both countries.
Authored by: Michal Gorzynski, Julian Pankow, Krassen Stanchev, Georgi Stoev, Mateusz Walewski, Assenka Yonkova
Published in 2000
Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland.
Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market.
The authors evaluate the effects of potential measures to liberalize trade between the EU and the CIS using a computable general equilibrium (CGE) model. They look at the CIS as an aggregate and we also present results for individual CIS countries. Their CGE model takes different underlying industry specific market structures and elasticities into account. Furthermore, the model incorporates estimated non-tariff trade barriers to trade in services. The results are compared to a baseline which incorporates recent developments in the trade policy environment, i.e. the phase out of ATC, enlargement of the EU and CIS accessions to the WTO. The analysis takes agricultural liberalization, liberalization in industrial tariffs, and liberalization in services trade as well as trade facilitation measures into account. While there is important heterogeneity in the impact of FTAs on individual countries, the results indicate that the CIS as a whole would experience a negative income effect if the FTA would be limited only to trade in goods. This implies that the CIS would most likely to benefit from an FTA with the EU if it would incorporate deeper form of integration not being limited to liberalization of tariffs in goods.
Authored by: Joseph Francois, Miriam Manchin
Published in 2009
Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Current report aims to identify major existing gaps in the four socio-economic dimensions (economic, human, environmental, and institutional) and to reveal those gaps which could potentially hinder social and economic integration of neighbor states with the EU. To achieve this, the authors aim to assess the existing trends in the size of the gaps across countries and problem areas, taking into consideration the specific origin of the gap between EU15/EU12, on the one hand, and FSU republics, EU candidates and West Balkan countries, on the other hand.
Authored by: Alexander Chubrik, Irina Denisova, Vladimir Dubrovskiy, Marina Kartseva, Irina Makenbaeva, Magdalena Rokicka, Irina Sinitsina, Michael Tokmazishvili
Published in 2007
Labour migration does not appear to have the same magnitude and socio-economic importance in Belarus as in other EaP countries. It is one of the few post-socialist economies that have preserved the dominance of the state sector and built complicated systems of subsidisation and economic support for the population designed to manage the political-business cycle (see Chubrik, Shymanovich, Zaretsky (2012)). This model has allowed the economy to grow quite steadily until recently. However, the distorted system of incentives that was created for enterprises and households has resulted in the need for a “correction”, which happened in the form of a balance of payments crisis in 2011. The impact of this factor on migration has not been fully visible yet. At the same time the relatively long period of stability and gradual, but steady, increase in welfare payments has played a role as a migration-restraining factor. In order to estimate cost and benefits of labour migration between EU and Belarus, this study utilises publically available literature as background and relies where possible on micro-data: Census-2009, Household Budget Survey (HBS), as well as relevant official data and data from polls related to the topic. Additionally, some sections of this report rely on information collected in the course of a focus group meeting with labour migrants and a series of in-depth interviews with officials from state, international, and non-governmental agencies dealing with migration. Lastly, in some cases anecdotal evidence was collected to support some of the new trends that have not yet been recorded in the statistics.
Authored by: Alexander Chubrik and Alaksei Kazlou
The ILO and the informal sector: an institutional historyDr Lendy Spires
To learn from history, we must know it. Over the past three decades, the ILO has been both the midwife and the principal international institutional home for the concept of the informal sector. As we enter the next millennium, with a new Director General and a refocused mandate on “decent work” and an increased emphasis on to the marginalised and the excluded, it seems timely to pause and look back.
Over these past thirty odd years, how has this institution wrestled with the informal sector, both as a concept and as a painful reality for our constituents? Where did this concept come from? How has the ILO dealt with it over the years, with what successes ... and what failures? Despite these three decades of work, the informal sector is still a topic which elicits diverging views, sometimes passionately so, about how to define it, how to measure and to classify it, and especially about how to respond to it. There is even debate on what to call it. There is little divergence now, however, that the informal sector exists and will be with us for the foreseeable future.
This consensus is in large measure the result of these three decades of ILO’s effort both to develop the concept of the informal sector and to implant it into the development paradigm. In this paper, I focus on recording the institutional history of this effort rather than on the concept itself. The concept of the informal sector has itself evolved over these years. My intention, however, is neither to trace that conceptual evolution nor to explore its current state. That is a sufficiently broad topic on its own to merit taking up separately. In this paper, I concentrate on the bureaucratic or institutional history of the ILO and the informal sector.
How did the International Labour Office, as a large international and also bureaucratic institution (with both the strengths and the weaknesses these characteristics entail) respond to a concept and an economic reality which is both central to the institution’s core mandate of social justice and at the same time foreign to its traditionally understood tripartite constituency and institutional culture? The “official record” of an institution is just the skeleton of its history. Each officially recorded event is done (or left undone), supported (or opposed) by real people. An institutional history, then, should also include this sometimes collaborative and sometimes conflictual but always complex human interaction of the people actually involved in these events. In the following pages, I have tried to provide an account not just of the official events by the formal institutional ILO, but also some of the human environment and the professional context within which these events took place.
For some of these, I was a participant; for many others, they happened “just down the hall” and I knew personally the officials who were involved. So what follows includes an element of personal memoir.
The Stockholm Institute of Transition Economics (SITE) has the pleasure to invite you to a presentation on Friday January 25, 12.00 – 14.00 with Maurizio Bussolo, lead economist in Europe and Central Asia Chief Economist Office at the World Bank.
For more information please follow the link:
This paper provides an overview of public expenditures on education and healthcare in Belarus, Georgia, Kyrgyzstan, Moldova, Russia, Ukraine and some other countries of the former Soviet Union before and during the global financial crisis. Before the crisis, the governments of these countries were substantially increasing spending on education and health. The crisis adversely affected the FSU countries and worsened their fiscal situation. The analysis indicates that during the crisis, despite the fiscal constraints, public education and health expenditures have mostly been maintained or increased in almost all of these countries. However, the crisis situation was not taken as an opportunity to address these countries' key education and healthcare problems related to demographic changes, insufficient per capita expenditure levels, the low efficiency of public spending and the insufficient quality of services. These issues form an ambitious reform agenda for these countries in the medium- and long-term.
Authored by: Alexander Chubrik, Marek Dabrowski, Roman Mogilevsky, Irina Sinitsina
Published in 2011
Ukraine is a migration-intensive country, with an estimated 1.5-2 million labour migrants (about 5% of the working-age population). Slightly over a half of these migrants travel for work to the EU. This study discusses the impact of this large pool of migrants on both the sending and receiving countries. It also assesses how liberalisation of the EU visa regime, something that the EU is currently negotiating with Ukraine, will affect the stream of Ukrainian labour migrants to EU countries. Our study suggests that the number of tourists will increase substantially, whereas the increase in the number of labour migrants is unlikely to be very large. We also suggest that the number of legal migrants is likely to increase, but at the same time the number of illegal migrants will decline because currently only a third of migrants from Ukraine have both residence and work permits in the EU, while about a quarter of them stay there illegally.
Authored by: Hannah Vakhitova and Tom Coupé
Published in 2013
The paper analyses the relationship between labour costs and employment development in manufacturing industry in Poland, Czech Republic and Hungary. It indicates the need for thorough labour cost analysis in Europe in the context low employment rates among New Member States. The steps taken within the framework of the EU's common employment policy emphasise the crucial role of labour costsin enhancing labour demand.
The question raised in this paper is whether the cost of hiring labour is a significant determinant of employment in Polish, Czech and Hungarian manufacturing and is considered in terms of both relative (unit labour costs) and absolute (labour costs per one employee) measures. The study examines the labour costemployment relationship aiming to find out whether it differs significantly between the three countries and between commodity groups in manufacturing industry within each country.
Authored by: Agnieszka Furmanska-Maruszak
Published in 2006
The report aims to identify major existing gaps in the five socio-economic dimensions (economic, human, openness, environmental, and institutional) and to reveal those gaps which could potentially hinder social and economic integration of neighbor states with the EU. To achieve this, the authors aim to assess the existing trends in the size of the gaps across countries and problem areas, taking into consideration the specific origin of the gap between EU15/EU12, on the one hand, and FSU republics, EU candidates and West Balkan countries, on the other hand.
Authored by: Aziz Atamanov, Alexander Chubrik, Irina Denisova, Vladimir Dubrovskiy, Marina Kartseva, Irina Lukashova, Irina Makenbaeva, Magdalena Rokicka, Irina Sinitsina
Published in 2008
Michael Tokmazishvili
'Since 2008, the world economy has been facing the consequences of the global financial crisis. As a result, many economic policy paradigms have been revised, and this process is far from complete. The policy area, which needs a fundamental rethinking (especially in advanced economies), relates to the role of public finance and fiscal policy in ensuring economic growth and financial stability. The primary task will be to develop a new analytical approach and detailed indicators, which are necessary to provide a correct diagnosis and effective recommendations.'
What are the “safe” levels of budget deficit and public debt during “normal” or “good” times? Is there a single norm of fiscal safety?
These questions are discussed in the new paper by Marek Dabrowski: "Fiscal Sustainability: Conceptual, Institutional, and Policy Issues".
The publication is a part of CASE Working Papers series.
This study provides an analysis of the costs and benefits of emigration for Georgia, with an emphasis on emigration to the EU. In the concluding section we dwell on the consequences of a possible liberalization of EU migration policies with regard to Eastern Partnership (EaP) countries, and how such a policy change would affect the flow and composition of migration from Georgia to the EU. The study estimates the costs and benefits of migration through the prism of recent economics developments in Georgia and in particular the sweeping liberalization reforms of recent years. While Georgia remains a poor country, its geopolitical position as a Western outpost in the Caucasus and Central Asian region, its role as a key trade and transportation hub, the superior quality of its bureaucracy, lack of corruption, etc., provide a very different context for migration processes, turning migration into a circular phenomenon, a major factor in modernizing the Georgian economy, society, and politics. The EU should give due consideration to this phenomenon as it (re)considers its policy on migration with regard to Georgia and, potentially, other EaP countries.
Authored by: Lasha Labadze and Mirian Tukhashvili
The projection examines impact of demographic changes and changes in health status on future (up to 2050) health expenditures. Next to it, future changes in the labour market participation and their imact on the health care system revenues are examined. Results indicate that due to demographic pressures health expenditures will increase in the next 40 years and health care systems in the NMS will face deficit. Moreover, health revenues, expenditures and deficit/surplus are slightly sensitive to possible labour market changes. Health care system reforms are required in order to balance the disequilibrium of revenues and expenditures caused by external factors (demographic and economic), and decrease the premium needed to cover expenditures. Such reforms should lead, on the one hand, to the rationing of medical services covered by public resources, and on the other, to more effective governance and management of the sector and within the sector.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2008
This study is part of the project entitled “Costs and Benefits of Labour Mobility between the EU and the Eastern Partnership Countries” for the European Commission1. The study was written by Luca Barbone (CASE) Mikhail Bonch- Osmolovskiy (CASE) and Matthias Luecke (CASE, Kiel). It is based on the six country studies for the Eastern Partnership countries commissioned under this project and prepared by Mihran Galstyan and Gagik Makaryan (Armenia), Azer Allahveranov and Emin Huseynov (Azerbaijan), Aleksander Chubrik and Aliaksei Kazlou (Belarus), Lasha Labadze and Mirjan Tukhashvili (Georgia), Vasile Cantarji and Georgeta Mincu (Moldova), Tom Coupé and Hanna Vakhitova (Ukraine). The authors would like to thank for their comments and suggestions Kathryn Anderson, Martin Kahanec, Costanza Biavaschi, Lucia Kurekova, Monica Bucurenciu, Borbala Szegeli, Giovanni Cremonini and Ummuhan Bardak, as well as the dbaretailed review provided by IOM. The views in this study are those of the authors’ only, and should not be interpreted as representing the official position of the European Commission and its institutions.
Written by Luca Barbone, Mikhail Bonch-Osmolovsky and Matthias Luecke. Published in September 2013.
PDF available on our website at: http://www.case-research.eu/en/node/58264
[En] More Yo-yos pendulums ... Empirica STAR Report Yann Gourvennec
The Empirirca 2003 report is sadly missed. This is in my eyes the only report which made it possible for one to understand what klind of diversity there is behind telecommuting...
I found this report in my archives and uploaded it here before it got lost again
New financial institutions, pension funds, are being established in Central and Eastern Europe, that are also an important element of the social security system. They provide an additional source of income in old age. This source is all the more important insofar as public, pay-as-you-go pension systems in many countries are having problems with meeting previous pension commitments, which were often excessively generous and did not take into account potential changes in demographic conditions and the labour market.
The subject of our consideration will be the experiences relating to pension fund regulations from the point of view of their safety of operations in five countries of Central and Eastern Europe.
Authored by: Stanislawa Golinowska and Piotr Kurowski
Published in 2000
The report discusses employment in the health care system in Poland based on analysis and projections of the demand and supply of medical workforce. The impact of the financial situation and policy on relativelly low employment level of medical personel was accounted for in the analysis while projections were driven by demographic changes in the following two decades. Results of different demographic variants of projections used in Neujobs project and additional scenarios show that while ageing is an important factor that may stimulate demand for provision of medical personnel, changes might be mitigated by further increase in efficiency of care. At the same time the supply of care will be affected by ageing too. The results indicate that more detailed monitoring of employment in the future will be needed in order to assure adequacy of provision of medical professionals, especially of nurses (critical gap), some medical specialists, physiotherapists and medical technical personnel.
This report was prepared within a research project entitled NEUJOBS, which has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no. 266833.
Written by Stanislawa Golinowska, Agnieszka Sowa and Ewa Kocot. Published in August 2014.
PDF available on our website at: http://www.case-research.eu/en/node/58694
The paper attempts to identify indirectly vertical product differentiation in three industries of Polish manufacturing (manufacture of glass and glass products, manufacture of other general purpose machinery and manufacture of other special purpose machinery) by examining how focus on a given group of customers (segment) is related to company characteristics. Changes in companies' segment orientation between 2002 and 2005 are examined and the factors of these changes are discussed. The analysis is based on a survey of 77 companies.
The data support the hypothesis that there exist segments in the consumer goods market, defined by the income level of customers. In the capital goods market, it is shown that domestic-owned customers are the low-end segment of the market, whereas foreign-owned customers constitute a higher segment. It seems that industries producing capital goods have shifted towards higher market segments between 2002 and 2005 and their principal motive was the pressure exerted by competitors, both domestic and foreign.
Authored by: Iga Magda, Krzysztof Szczygielski
Published in 2006
Demographic change (driven by the second demographic transition) led to an uncontrolled increase in scale of various social expenditure in the OECD area, especially in continental Europe. Costs of social transfers created fiscal pressure leading to the necessity of tax increases all over Europe, including the New Member States. Employment consequences of emerging higher tax wedge has become the topic of large body of research. However, surprisingly little evidence is known on distribution of that problem across workers. Is the effect of high tax wedge equally spread or certain groups of workers suffer more than others? More specifically, are low productivity workers exposed more to the problems caused by high tax wedge?
Authored by: Marek Gora, Artur Radziwill, Agnieszka Sowa, Mateusz Walewski
Published in 2006
The Lisbon Strategy launched by the European Union in 2000 was designed to increase the growth and modernize Europe, while caring for sustainable development and social cohesion. The Strategy represented an innovative approach to development because economic objectives were not juxtaposed with social ones. Instead, the Strategy endeavoured to demonstrate that economic and social objectives are intertwined and the implementation the economic objectives might feed-back support and strength to the social objectives, and vice versa.
Authored by: Urlik Butzow Mogensen, Patrick Lenain, Vicente Royuela-Mora
The paper discusses the challenges of the collaborative economy as a system stimulating female social and economic empowerment and assesses the opportunities offered by the collaborative economy in increasing the female labour participation rate amongst Polish women.
Researchers at the EU’s Joint Research Center used the Social Hotspot Database together with EU trade statistics, to look at comprehensive supply chain risks for the EU-27 countries.
The methods described and applied in the study can be applied equally by companies to discover and understand the social risks and opportunities in their own supply chains.
The report concludes
"Our analysis underscores the importance of a life cycle-based approach to understanding and managing social risk in support of policies for socially sustainable development. Moreover, the methods and information presented herein offer a potentially powerful decision-support tool for policy makers wishing to better understand the magnitude and distribution of social risk associated with EU production and consumption patterns, the mitigation of which will contribute to socially sustainable development within Europe and abroad.”
Similar to Social harmonization and labor market performance in europe (20)
The report examines the social and economic drivers and impact of circular migration between Belarus and Poland, Slovakia, and the Czech Republic. The core question the authors sought to address was how managing circular migration could, in the long term, help to optimise labour resources in both the country of origin and the destination countries. In the pages that follow, the authors of the report present the current and forecasted labour market and demographic situation in their respective countries as well as the dynamics and characteristics of short-term labour migration flows between Belarus and Poland, Slovakia, and the Czech Republic, concentrating on the period since 2010. They also outline and discuss related policy responses and evaluate prospects for cooperation on circular migration.
Podręcznik został opracowany w celu przekazania trenerom i nauczycielom podstawowej wiedzy, która może być przydatna w prowadzeniu szkoleń promujących pracę rejestrowaną. Prezentuje on z jednej strony korzyści z pracy rejestrowanej, z drugiej – potencjalne koszty związane z pracą nierejestrowaną. W pierwszej kolejności informacje te przedstawiono w odniesieniu do pracowników najemnych (rozdział 2), podkreślając w sposób szczególny to, że negatywne konsekwencje pracy nierejestrowanej są ponoszone przez całe życie. Ze względu na specyficzną sytuację cudzoziemców pracujących w Polsce konsekwencje ponoszone przez tę grupę opisano oddzielnie (rozdział 3). Ponadto zaprezentowano skutki dotyczące pracodawców z szarej strefy z wyodrębnieniem tych, którzy zatrudniają cudzoziemców (rozdział 4). Uzupełnieniem przedstawionych informacji jest opis działań podejmowanych przez państwo w celu ograniczenia zjawiska pracy nierejestrowanej w Polsce (rozdział 5) oraz prowadzonych w Wielkiej Brytanii, czyli w kraju będącym liderem w walce z szarą strefą (rozdział 6).
European countries face a challenge related to the economic and social consequences of their societies’ aging. Specifically, pension systems must adjust to the coming changes, maintaining both financial stability, connected with equalizing inflows from premiums and spending on pensions, and simultaneously the sufficiency of benefits, protecting retirees against poverty and smoothing consumption over their lives, i.e. ensuring the ability to pay for consumption needs at each stage of life, regardless of income from labor.
One of the key instruments applied toward these goals is the retirement age. Formally it is a legally established boundary: once people have crossed it – on average – they significantly lose their ability to perform work (the so-called old-age risk). But since the 1970s, in many developed countries the retirement age has become an instrument of social and labor-market policy. Specifically, in the 1970s and ‘80s, an early retirement age was perceived as a solution allowing a reduction in the supply of labor, particularly among people with relatively low competencies who were approaching retirement age, which is called the lump of labor fallacy. It was often believed that people taking early retirement freed up jobs for the young. But a range of economic evidence shows that the number of jobs is not fixed, and those who retire don’t in fact free up jobs. On the contrary, because of higher spending by pension systems, labor costs rise, which limits the supply of jobs. In general, a good situation on the labor market supports employment of both the youngest and the oldest labor force participants. Additionally, a lower retirement age for women was maintained, which resulted to a high degree from cultural conditions and norms that are typical for traditional societies.
Until now, the banking sector has been one of the strong points of Poland’s economy. In contrast to banks in the U.S. and leading Western European economies, lenders in Poland came through the 2008 global financial crisis without a scratch, without needing state financial support. But in recent years the industry’s problems have been growing, creating a threat to economic growth and gains in living standards.
For an economy’s productivity to increase, funds can’t go to all companies evenly, and definitely shouldn’t go to those that are most lacking in funds, but to those that will use them most efficiently. This is true of total external financing, and thus funding both from the banking sector and from parabanks, the capital market and funds from public institutions. In Poland, in light of the relatively modest scale of the capital market, banks play a clearly dominant role in external financing of companies. This is why the author of this text focuses on the bank credit allocation efficiency.
The author points out that in the very near future, conditions will emerge in Poland which – as the experience of other countries shows – create a risk of reduced efficiency of credit allocation to business. Additionally, in Poland today, bank lending to companies is to a high degree being replaced by funds from state aid, which reduces the efficiency of allocation of external funds to companies (both loans and subsidies), as allocation of government subsidies is not usually based on efficiency. This decline in external financing allocation efficiency may slow, halt or even reverse the process, that has been uninterrupted for 28 years, of Poland’s convergence, i.e. the narrowing of the gap in living standards between Poland and the West.
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance.
This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
The rule of law, by securing civil and economic rights, directly contributes to social prosperity and is one of our societies’ greatest achievements. In the European Union (EU), the rule of law is enshrined in the Treaties of its founding and is recognised not just as a necessary condition of a liberal democratic society, but also as an important requirement for a stable, effective, and sustainable market economy. In fact, it was the stability and equality of opportunity provided by the rule of law that enabled the post-war Wirtschaftswunder in Germany and the post-Communist resuscitation of the economy in Poland.
But the rule of law is a living concept that is constantly evolving – both in its formal, de jure dimension, embodied in legislation, and its de facto dimension, or its reception by society. In Poland, in particular, according to the EU, the rule of law has been heavily challenged by government since 2015 and has evolved amid continued pressure exerted on the institutions which execute laws. More recently, the outbreak of the COVID-19 pandemic transformed the perception of the rule of law and its boundaries throughout the EU and beyond (Marzocchi, 2020).
This Study contains Value Added Tax (VAT) Gap estimates for 2018, fast estimates using a simplified methodology for 2019, the year immediately preceding the analysis, and includes revised estimates for 2014-2017. It also includes the updated and extended results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). As a novelty, the econometric analysis to forecast potential impacts of the coronavirus crisis and resulting recession on the evolution of the VAT Gap in 2020 is reported.
In 2018, most European Union (EU) Member States (MS) saw a slight decrease in the pace of gross domestic product (GDP) growth, but the economic conditions for increasing tax compliance remained favourable. We estimate that the VAT total tax liability (VTTL) in 2018 increased by 3.6 percent whereas VAT revenue increased by 4.2 percent, leading to a decline in the VAT Gap in both relative and nominal terms. In relative terms, the EU-wide Gap dropped to 11 percent and EUR 140 billion. Fast estimates show that the VAT Gap will likely continue to decline in 2019.
Of the EU-28, the smallest Gaps were observed in Sweden (0.7 percent), Croatia (3.5 percent), and Finland (3.6 percent), the largest – in Romania (33.8 percent), Greece (30.1 percent), and Lithuania (25.9 percent). Overall, half of the EU-28 MS recorded a Gap above 9.2 percent. In nominal terms, the largest Gaps were recorded in Italy (EUR 35.4 billion), the United Kingdom (EUR 23.5 billion), and Germany (EUR 22 billion).
The euro is the second most important global currency after the US dollar. However, its international role has not increased since its inception in 1999. The private sector prefers using the US dollar rather than the euro because the financial market for US dollar-denominated assets is larger and deeper; network externalities and inertia also play a role. Increasing the attractiveness of the euro outside the euro area requires, among others, a proactive role for the European Central Bank and completing the Banking Union and Capital Market Union.
Forecasting during a strong shock is burdened with exceptionally high uncertainty. This gives rise to the temptation to formulate alarmist forecasts. Experiences from earlier pandemics, particularly those from the 20th century, for which we have the most data, don’t provide a basis for this. The mildest of them weakened growth by less than 1 percentage point, and the worst, the Spanish Flu, by 6 percentage points. Still, even the Spanish Flu never caused losses on the order of 20% of GDP – not even where it turned out to be a humanitarian disaster, costing the lives of 3-5% of the population. History suggests that if pandemics lead to such deep losses at all, it’s only in particular quarters and not over a whole year, as economic activity rebounds. The strength of that rebound is largely determined by economic policy. The purpose of this work is to describe possible scenarios for a rebound in Polish economic growth after the epidemic.
A separate issue, no less important, is what world will emerge from the current crisis. In the face of the 2008 financial crisis, White House Chief of Staff Rahm Emanuel said: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” Such changes can make the economy and society function better than before the crisis. Unfortunately, the opportunities created by the global financial crisis were squandered. Today’s task is more difficult; the scale of various problems has expanded even more. Without deep structural and institutional changes, the world will be facing enduring social and economic problems, accompanied by long-term stagnation.
"Many brilliant prophecies have appeared for the future of the EU and our entire planet. I believe that Europe, in its own style, will draw pragmatic conclusions from the crisis, not revolutionary ones; conclusions that will allow us to continue enjoying a Europe without borders. Brussels will demonstrate its usefulness; it will react ably and flexibly. First of all, contrary to the deceitful statements of members of the Polish government, the EU warned of the threats already in 2021. Secondly, already in mid-March EU assistance programs were ready, i.e. earlier than the PiS government’s “shield” program. The conclusion from the crisis will be a strengthening of all the preventive mechanisms that allow us to recognize threats and react in time of need. Research programs will be more strongly directed toward diagnosing and treating infectious diseases. Europe will gain greater self-sufficiency in the area of medical equipment and drugs, and the EU – greater competencies in the area of the health service, thus far entrusted to the member states. The 2021-27 budget must be reconstructed, to supplement the priority of the Green Deal with economic stimulus programs. In this way structural funds, which have the greatest multiplier effect for investment and the labor market, may return to favor. So once again: an addition, as a conclusion from the crisis, and not a reinvention of the EU," writes Dr. Janusz Lewandowski the author of the 162nd mBank-CASE seminar Proceeding.
Dla wielu rodaków europejskość Polski jest oczywista, trudno jest im nawet wyobrazić sobie, jak kształtowałyby się losy naszego kraju bez uczestnictwa w integracji europejskiej. Szczególnie młode pokolenie traktuje osiągnięty przez nas dzięki uczestnictwie w Unii ogromny postęp cywilizacyjny jako coś danego i naturalnego. Jednak świadomość tego, jaki był nasz punkt wyjścia, jaką przeszliśmy drogę i jak przyczyniły się do tego unijne działania oraz jakie wynikały z tego korzyści powinna nam stale towarzyszyć. Bez tej świadomości, starannego weryfikowania faktów i docenienia naszych osiągnięć grozi nam uleganie niesprawdzonym argumentom przeciwników integracji europejskiej i popełnienie nieodwracalnych błędów. Dla tych, którzy chcą poznać te fakty, przygotowany został raport "Nasza Europa. 15 lat Polski w Unii Europejskiej". Podjęto w nim ocenę 15 lat członkostwa Polski z perspektywy doświadczeń procesu integracji, z jego barierami i sukcesami, a także wyzwaniami przyszłości.
Raport jest wynikiem pracy zbiorowej licznych ekspertów z różnych dziedzin, od wielu lat analizujących wielowymiarowe efekty działania instytucji UE oraz współpracy z krajami członkowskimi na podstawie europejskich wartości i mechanizmów. Autorzy podsumowują korzyści członkostwa Polski w Unii Europejskiej na podstawie faktów, nie stroniąc jednakże od własnych ocen i refleksji.
This report is the result of the joint work of a number of experts from various fields who have been - for many years – analysing the multidimensional effects of EU institutions and cooperation with Member States pursuant to European values and mechanisms. The authors summarise the benefits of Poland’s membership in the EU based on facts; however, they do not hide their own views and reflections. They also demonstrate the barriers and challenges to further European integration.
This report was prepared by CASE, one of the oldest independent think tanks in Central and Eastern Europe, utilising its nearly 30 years of experience in providing objective analyses and recommendations with respect to socioeconomic topics. It is both an expression of concern about Poland’s future in the EU, as well as the authors’ contribution to the debate on further European integration.
Poland’s new Employee Capital Plans (PPK) scheme, which is mandatory for employers, started to be implemented in July 2019. The article looks at the systemic solutions applied in the programme from the perspective of the concept of the simultaneous reconstruction of the retirement pension system. The aim is to present arguments for and against the project from the point of view of various actors, and to assess the chances of success for the new system. The article offers a detailed study of legal solutions, an analysis of the literature on the subject, and reports of institutions that supervise pension funds. The results of this analysis point to the lack of cohesion between certain solutions of the 1999 pension reform and expose a lack of consistency in how the reform was carried out, which led to the eventual removal of the capital part of the pension system. The study shows that additional saving for old age is advisable in the country’s current demographic situation and necessary for both economic and social reasons. However, the systemic solutions offered by the government appear to be chiefly designated to serve short-term state interests and do not create sufficient incentives for pension plan participants to join the programme.
Belarus was among the few post-communist countries to resign from comprehensive market reforms and attempt to improve the efficiency of the economy through administrative means, leaving market mechanisms only an auxiliary role. Since its inception, the ‘Belarusian economic model’ has undergone several revisions of a de-statisation and de-regulation kind, but still the Belarusian economy remains dominated by the state. This paper analyses the characteristic features of the Belarusian economic system – especially those related to the public sector – as well as its evolution over time during the period following its independence. The paper concludes that during the post-Soviet period, the Belarusian economy evolved from a quasi-Soviet system based on state property, state planning, support to inefficient enterprises and the massive redistribution of funds to a more flexible hybrid model where the public sector still remains the core of the economy. The case of Belarus shows that presently there is no appropriate theoretical perspective which, in an unmodified form, could be applied to study this type of economic system. Therefore, a new perspective based on an already existing but updated approach or a multidisciplinary approach that incorporates the duality of the Belarusian economy is required.
Belarusian economy has been stagnating in 2011-2015 after 15 years of a high annual average growth rate. In 2015, after four years of stagnation, the Belarusian economy slid into a recession, its first since 1996, and experienced both cyclical and structural recessions. Since 2015, the Belarusian government and the National Bank of Belarus have been giving economic reforms a good chance thanks to gradual but consistent actions aimed at maintaining macroeconomic stability and economic liberalization. It seems that the economic authorities have sustained more transformation efforts during 2015-2018 than in the previous 24 years since 1991.
As the relative welfare level in Belarus is currently 64% compared to the Central and Eastern Europe (CEE) countries average, Belarus needs to build stronger fundaments of sustainable growth by continuing and accelerating the implementation of institutional transformation, primarily by fostering elimination of existing administrative mechanisms of inefficient resource allocation. Based on the experience of the CEE countries’ economic transformation, we highlight five lessons for the purpose of the economic reforms that Belarus still faces today: keeping macroeconomic stability, restructuring and improving the governance of state-owned enterprises, developing the financial market, increasing taxation efficiency, and deepening fiscal decentralization.
Estonia has Europe’s most transparent tax system (while Poland is second-to-last, in 35th place), and is also known for its pioneering approach to taxation of legal persons’ income. Since 2000, payers of Estonian corporate tax don’t pay tax on their profits as long as they don’t realize them. In principle, this approach should make access to capital easier, spark investment by companies and contribute to faster economic growth. Are these and other positive effects really noticeable in Estonia? Have other countries followed in this country’s footsteps? Would deferment of income tax be possible and beneficial for Poland? How would this affect revenue from tax on corporate profits? Would investors come to see Poland as a tax haven? Does the Estonian system limit tax avoidance and evasion, or actually the opposite? Is such a system fair? Are intermediate solutions possible, which would combine the strengths or limit the weaknesses of the classical and Estonian models of profit tax? These questions are discussed in the mBank-CASE seminar Proceeding no. 163, written by Dmitri Jegorov, deputy general secretary of the Estonian Finance Ministry, who directs the country’s tax and customs policy, Dr. Anna Leszczyłowska of the Poznań University of Economics and Business and Aleksander Łożykowski of the Warsaw School of Economics.
The trade war between the U.S. and China began in March 2018. The American side raised import duties on aluminum and steel from China, which were later extended to other countries, including Canada, Mexico and the EU member states. This drew a negative reaction from those countries and bilateral negotiations with the U.S. In June 2018 America, referring to Section 301 of its 1974 Trade Act, raised tariffs to 25% on 818 groups of products imported from China, arguing that the tariff increase was a response to years of theft of American intellectual property and dishonest trade practices, which has caused the U.S. trade deficit.
Will this trade war mean the collapse of the multilateral trading system and a transition to bilateral relationships? What are the possibilities for increasing tariffs in light of World Trade Organization rules? Can the conflict be resolved using the WTO dispute-resolution mechanism? What are the consequences of the trade war for American consumers and producers, and for suppliers from other countries? How high will tariffs climb as a result of a global trade war? How far can trade volumes and GDP fall if the worst-case scenario comes to pass? Professor Jan J. Michałek and Dr. Przemysław Woźniak give answers to these questions in the mBank-CASE Seminar Proceeding No. 161.
This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018.
This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses.
The paper discusses the role of the state in shaping an economic system which is, in line with the welfare economics approach, capable of performing socially important functions and achieving socially desirable results. We describe this system through a set of indexes: the IHDI, the World Happiness Index, and the Satisfaction of Life index. The characteris-tics of the state are analyzed using a set of variables which describe both the quantitative (government size, various types of governmental expenditures, and regulatory burden) and qualitative (institutional setup and property rights protection) aspects of its functioning. The study examines the “old” and “new” member states of the European Union, the post-communist countries of Eastern Europe and Asia, and the economies of Latin America. The main conclusion of the research is that the institutional quality of the state seems to be the most important for creation of a socially effective economic system, while the level of state interventionism plays, at most, a secondary and often negligible role. Geographical differentiation is also discovered, as well as the lack of a direct correlation between the characteristics of an economic system and the subjective feeling of well-being. These re-sults may corroborate the neo-institutionalist hypothesis that noneconomic factors, such as historical, institutional, cultural, and even genetic factors, may play an important role in making the economic system capable to perform its tasks; this remains an area for future research.
EuroPACE is an innovative financial mechanism inspired by an American building improvement initiative called Property Assessed Clean Energy (PACE). The innovative character of the EuroPACE mechanism is that financing through EuroPACE is linked to the taxes paid on a property. In other words, the financing lent by a private investor is repaid through property taxes and other charges related to the buildings. EuroPACE is therefore in line with the EC’s objectives of (1) putting EE first, (2) contributing to the EU’s global leadership, and (3) empowering consumers to enable MS to reach their energy and climate targets for 2030. Last but not least, EuroPACE could contribute to the democratisation of the energy supply by offering cash-flow positive, decentralised EE solutions.
The EuroPACE mechanism engages several stakeholders in the process: local government, investors, equipment installers, and homeowners. To establish the EuroPACE programme, several conditions must be satisfied, each of which are relevant for different stakeholder at different stages of the implementation. For the purpose of this report, we divided these criteria into two categories: key criteria, which make the implementation possible, and complementary criteria, which make the implementation easier. For the time being, it is a pure hypothesis to be tested with potential EuroPACE implementation.
More from CASE Center for Social and Economic Research (20)
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
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what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
5. CASE Project Reports | Nr 487 (2017)
5
List of Tables in Annex 1
Table A1: Minimum wages in the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table A2: Unemployment rate, inactive population, and employment rate
for the population aged 15–64 and 50+, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . 37
List of Charts in Annex 2
Chart A1: Tax wedge in EU/OECD countries, 2015 (total, % of labor costs) . 38
Chart A2: Tax wedge level (as % of total labor cost) on low-wage earners
(i.e. single persons without children earning 67% of the average wage),
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Chart A3: Ratio of minimum relative to average wages
of full-time workers, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Chart A4: Median gross hourly earnings and purchasing power standard,
all employees (excluding apprentices), 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Chart A5: Expenditure on social protection in purchasing power standard
per inhabitant in the EU, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Chart A6: Expenditure on social protection as a % of GDP, 2014 . . . . . . . . . . 41
Chart A7: Total receipts from taxes and social contributions
(including imputed social contributions) after deduction of amounts assessed
but unlikely to be collected, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6. CASE Working Paper | No 1 (2015)
6
Katarzyna Mirecka is an economist at Center for Social and Economic Research (CASE)
in Warsaw, specializing in subjects concerning social development issues. She graduated
from Université Stendhal Grenoble III (France) and Poznań University of Economics
(Poland). Katarzyna gained her first experience while working as a project manager for
a Brussels-based NGO. At CASE she has broaden her experience in policy research,
conducting interviews, data collecting and analyzing while writing applications and work-
ing in numerous projects for Polish and European institutions. Currently she acts as an
expert in the project about enhancing CSOs contribution to evidence-based policy making
for vulnerable groups in Belarus and Visegrad countries.
Izabela Styczyńska, PhD, is a researcher and expert in issues such as the labor market,
social policy, and employment and is the Vice-President of the CASE Management Board.
She obtained her PhD from the University of Turin in 2011. She holds a Master’s degree
in Economics from Warsaw University and a Master’s degree in economics from CORIPE
Piemonte in Turin. She has cooperated with CASE since 2005, participating in its
numerous Polish and international projects. She is the author of publications in the fields
of labor economics, social policy and health economics.
Authors
7. CASE Working Paper | No 1 (2015)
7
The paper aims to assess the impact of selected elements of social harmonization on
labor market performance in the European Union among two groups of workers – the
total working population and the elderly. The aim is to examine whether upward changes
in labor taxes affect employment, unemployment, and inactivity rates in the European
Union. The descriptive empirical evidence shows that the level of labor taxation varies
significantly across European countries and the introduced changes might affect national
markets differently. The Arellano-Bond dynamic panel data regression shows that an
increase in the tax wedge, as an element of a social harmonization process, has a very weak
impact on labor market performance in the European Union. The impact is statistically
significant and negative only for the elderly (i.e. the population aged 50+). Empirical
analysis suggests that upward social convergence might negatively affect the employment
of the most disfavored groups in the labor market, such as the elderly. It suggests that
social harmonization focused on reducing the tax wedge would have favorable effects
on labor market performance, especially among the most disadvantaged groups.
Abstract
8. CASE Working Paper | No 1 (2015)
8
Documents such as the Treaty establishing the European Community and the European
Union (EU) Charter of Fundamental Rights set down fundamental social objectives, such
as the promotion of employment and social protection, and include principles such as
freedom, equality and solidarity, the right to fair and just working conditions, as well
as social security and social assistance and equality between men and women.
During the last two decades, these social objectives have evolved, taking the form
of the concept of a “Social Europe,” which aims to introduce social harmonization within
the EU. Social harmonization, which is an issue that has not been clarified for a signif-
icant period of time, is nowadays built on such elements as cohesion in social security
contributions (SSC), personal income taxes (PIT), and “equal pay for equal work” among
EU countries. Therefore, the concept is strongly related to labor taxation in European
countries, as well as to the labor market policies affecting labor market performance and
different working groups.
The impact of labor taxation on labor market performance has been the subject of
numerous studies in recent years. The impact of the “tax wedge” – the difference between
the real labor cost and the salary an employee receives in her bank account – on employ-
ment has also been broadly evaluated. The tax wedge consists of PIT, employer and employee
SSC, and payroll taxes. Depending on the environment the individual operates in, diverse
elements of the tax wedge have different distortionary effects on the economy. In
a perfectly competitive labor market, only the total tax wedge is important. Regardless
of which element of the labor tax is changed, the impact of taxation weakens labor market
performance. When the labor market is imperfectly competitive, the composition of the
tax wedge becomes relevant, and changes in the various labor taxes can affect the labor
market performance differently. Therefore, it is extremely relevant to examine what
elements of the tax wedge would be affected by upward social harmonization, as well as
how they would influence labor market performance.
Labor market supply elasticity determines how the impact of a tax change is distribut-
ed over employment, unemployment, or inactivity. If labor-supply elasticity is large, labor
market outcomes move significantly. Empirical studies show that labor supply elasticity
1. Introduction
9. CASE Project Reports | Nr 487 (2017)
9
is different for different groups of people. For example, it has been found that the
low-skilled, females, and the elderly are the groups that are particularly responsive to
changes in taxes and transfers.1
In addition, in recent years, tax policy analysts created a ranking of taxes according
to their distortionary effect on economic performance in light of the evolving globalization
processes. The least distortive taxes are taxes on immobile property, followed by
consumption taxes, PIT, and corporate income taxes.2
The ranking confirms that with
the open economy and the process of globalization, the ease of changing locations
affects the distortion. The ease of changing locations for firms makes the corporate tax
very volatile and responsive to tax competition among countries. PIT is less mobile,
but legislation like the Directive of Posted Workers give some freedom to optimize it.
Consumption taxes are less responsive to competition, whereas immobile property is
affected the least by globalization.
After the recent global financial crisis, the EU and EU countries attempted to design
tax systems that effectively respond to the abovementioned volatility. The aims of the
changes are to create taxes that have a positive impact on a country’s economy, public
finances, growth, employment, and competitiveness.3
Therefore, current discussions on
policy in this area are focusing on identifying appropriate ways to shift some of the tax
burden away from labor and on to other types of taxation that are typically less harmful
to employment and growth, such as consumption, recurrent property, and environmental
taxes.4
Upward social convergence, understood as an increase in SSC and PIT imposed
on labor, seems to contradict research findings, policy recommendations, and European
Commission actions. On the other hand, social harmonization might be a solution to de-
crease the distortionary effect of the labor tax caused by market openness and the
free movement of people.
Therefore, at this point in time, it is extremely relevant to examine how the proposed
changes might affect the performance of the European labor market. The focus of this study
will be on people aged 50+, as the aging of populations is one of the demographic challenges
Europe has been facing in recent years. Many studies show that the elderly experience strong
barriers in retaining employability with age,5
and that their labor market supply-elasticity
1 Siebertova, Z. et al. (2013), McClelland, R., Mok, S. (2012), Vodopivec, M. (2004)
2 European Commission (2011)
3 DG TAXUD (2015)
4 DG TAXUD (2011)
5 MOPACT (2016)
10. CASE Project Reports | Nr 487 (2017)
10
is large.6
As a result, special measures are being developed at the EU and country level
to increase the attractiveness of this working group in national labor markets and to
decrease the level of their inactivity. Therefore, the aim of this study is to examine how
changes in certain elements of the national tax wedge caused by the implementation of
upward social harmonization affect the employment, unemployment, and inactivity rates
at the EU level in two groups: the total working population and those aged 50+.
Upward social harmonization, is this report, is defined as an increase in the PIT and
SSC paid by the employer, the employee, and the self-employed, and an increase in the
minimum wage. The methodology used for this study is the Arellano-Bond dynamic panel data
regression on a sample of EU-27 countries over the 2000–2012 period. The database used
is based on European Union Labour Force Survey (EU LFS) data merged with information
on tax policies from the Labour Market Reform (LABREF) database and the United Nations
Conference on Trade and Development (UNCTAD) database.
The main results of the study find that the impact of the defined taxes on the un-
employment, employment, and inactivity rates are, in the majority of cases, statistically
insignificant for the total working population. In cases when it is significant, the impact is
weak. When analyzing the impact of changes in the PIT, SSC, or the increase of the mini-
mum wage within the group of the elderly, the variables become statistically significant and,
in addition, negatively affect labor market participation within this working group.
Changes in taxation, aimed to deliver the social harmonization of labor taxes, play
a minor role in determining the outcomes of the labor market on the whole working
population. They have a significant impact on specific groups of people, like the elderly,
who are more at risk of being dismissed, or who are less interested in working once they
have reached the retirement age.
Therefore, policy makers, when developing social harmonization within Europe,
should pay special attention to the elderly and, in general, to the groups of people whose
participation in the labor market strongly depends on their marginal tax rates.
The structure of the paper is as follows. Next, we present the European context
of the study on social harmonization. The following chapter describes the methodology,
its limitations, databases, variables used, and then, we describe the results of the model
for the whole working population, as well as for people aged 50+. The final chapter presents
conclusions and policy recommendations.
6 NEUJOBS (2011)
11. CASE Working Paper | No 1 (2015)
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Documents such as the Treaty establishing the European Community and the EU Charter
of Fundamental Rights set down fundamental social objectives such as the promotion of
employment and social protection, and include principles such as freedom, equality and
solidarity, the right to fair and just working conditions, as well as social security and social
assistance and equality between men and women.
The Treaty on the EU established the European Employment Strategy (EES) aiming
at creating more and better jobs in the EU, and now constitutes a part of the Europe 2020
growth strategy. The EU’s role in social policy is to provide “openness and mobility with domes-
tic social cohesion; it should support national welfare states on a systemic level in some of their
key functions; it should guide the substantive development of national welfare states by
indicating general social standards and objectives and organizing mutual learning processes,
but leaving the ways and means to the Member States.”7
The EU founding fathers assumed that supranational economic cooperation could be
a tool for establishing cohesion both between and within countries. However, as traditional
frameworks are not fit for managing the current challenges, the EU needs to create a virtuous
circle where both pan-European and national cohesion are enhanced, and “needs to support
both convergence towards higher levels of prosperity and well-being across the member
states and convergence towards more equality within the member states.”8
The European Social Model was the first step towards realizing these goals and was a
tool to cope with globalization and the economic reforms made at the expense of workers’
rights. It addresses six areas: workers’ rights and working conditions, social protection, labor
market policy, public services, social dialogue, and social cohesion. More precisely, the European
Social Model aims at the following outcomes: the achievement of employability, the improve-
ment of education, the fight against poverty and social exclusion, new family policies, the
achievement of gender equality, and active aging. Now, social harmonization is the next step.9
7 Vandenbroucke, F., Rinaldi, D. (2015)
8 Vandenbroucke, F., Rinaldi, D. (2015)
9 This section is the general context of the study http://www.case-research.eu/en/socialboost-effective-measures-of-social-har-
monization-as-a-boost-for-employability-in-tim
2. European Social Model
12. CASE Project Reports | Nr 487 (2017)
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Social harmonization is a relevant issue for today, as phenomena such as labor
migration, intra-EU mobility, and brain drain, which are closely linked to it, are increasing
and generating significant social and economic concerns for European and national policy
makers. Furthermore, the discussion is evolving quickly as recent events such as Brexit,
the Greek crisis, and the rise of populism in some Member States are influencing views
on the future of Europe, with many calling it a “European identity crisis.”
Social harmonization has been the subject of intense debate for several years. The main
argument against this concept is that there is the possibility of significant discrepancies
between EU and national priorities in the adoption of common guidelines. In post-
-communist countries, this concept is subject to controversy and skepticism as it is
associated with centrally-planned economic and social systems. After their accession
to the EU, new Member States experienced strong economic growth, but after the
Eurozone economic crisis, the convergence mechanism has slowed down considera-
bly.10
Since then, there has been strong pressure on governments to introduce austerity
policies: to reduce social spending and to increase savings. Additionally, some find that
job security was weakened by increased market flexibility; however, since then,
employment security has not been enhanced.11
Recently, there has been a new debate on the need for greater solidarity within Europe,
as well as greater fiscal and social harmonization, to tackle the problem of social
dumping and to improve the social well-being of European citizens. Documents such
as Mobility Package Directive on Posted workers or the European Pillar of Social Rights,
which are aimed at finding solutions to the current situation, have been issued and
debated. Opinions differ widely, especially depending on the different stakeholders
and their country of origin.
Given the increasing mobility across EU Member States, the topics of workers’
rights, working conditions, and public services have been among the most important
on the European agenda — the Labour Mobility Package was a part of the 2015 and 2016
Commission work programs.12
Labor mobility is considered as a necessary element of the
Single Market to absorb asymmetric market shocks, and social integration is a good way
to face economic crises (inclusive and dynamic labor markets, better skilled labor force,
and interventionist social systems). Therefore, upward convergence is seen as a key
element of the Economic and Monetary Union. The creation of a Mobility Package is
10 Vandenbroucke, F., Rinaldi, D. (2015)
11 Heyes, J., Hastings, T. (2016)
12 European Parliament (2016)
13. 13
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seen as a tool to gather and express in a clear form all existing provisions13
as well as to
contribute to a fairer and deeper Internal Market.14
One element of the Labour Mobility Package is a targeted review of the Posting
of Workers Directive. The Directive, first introduced in 1996, was strengthened by the
Enforcement Directive in 2014. On March 8, 2016, the European Commission announced
a reform of the laws on the posting of workers and, since then, it has been discussed
among Member States. The aim of the revision is to “facilitate the provision of services
across borders within a climate of fair competition and respect for the rights of posted
workers.”15
Specifically, employers of posted workers are currently obliged to award them
the minimum rate of pay, which leads to inequalities in the labor market, while under
the Directive, a rule of “equal pay for equal work” would be introduced. Another change
would be that if the duration of a posted worker’s contract is more than 24 months,
national labor laws must be applied. Finally, more attention will be paid to workers
sent by temporary agencies, so as to apply the national rules of the hosting country to
posted workers abroad.16
In 1996, when the Directive was first introduced, the EU was more homogenous,
and finding common solutions was easier to achieve.17
The European Commission’s
current propositions have faced strong opposition from 11 Southern and Eastern
European countries, who have asked for revisions by triggering the “yellow card”
procedure. The main issue has been whether new rules concerning social and work-
ing conditions should be established at the EU level, or if the countries should address
these matters at the national level. Researchers have shown that the EU should limit
its actions to providing a framework and support to national welfare states, but leave
the ways and means to the Member States.18
Employer organizations from new
Member States believe that the posting of workers is a way to achieve social
convergence in Europe, and only then will new Member States be able to provide
more social benefits. In their view, the revised Directive will lead to a more divided
Europe. Moreover, they claim that the assumptions cited in public debate are based
13 European Political Strategy Center (2015)
14 European Commission (2015a)
15 European Commission (2016)
16 Idem.
17 CEPS (2016)
18 Vandenbroucke, F., Rinaldi, D. (2015)
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on illegal practices.19
Not only are new Member States against the revision, but German
business representatives also claim the Directive’s revision goes against the Rome 1
Regulation regarding limitation of posting.20
There are concerns that the Directive would
harm the Internal Market and deprive entrepreneurs of the possibility to benefit from price
competition in the service sector.21
Yet, the European Commission decided that the princi-
ple of subsidiarity was not breached in the Directive and did not pursue the “yellow card”
procedure.
However, this positive view about free movement is not shared by everyone:
for instance, posted workers have been accused of fraud, abuse, and unfair competi-
tion.22
The “Polish plumber”—the skilled and cheap worker “stealing jobs from national
workers” has become a symbol of this phenomenon in public debates. Radical views
on European mobility are not rare: for example, French Presidential candidate Marine
Le Pen pledged that, if elected, she would introduce a 10% tax on all contracts employing
foreign workers.23
Despite integration-skeptical views, strong evidence in favor of more integration
has been found by researchers. In order to cushion the country-specific shocks
following the latest financial crisis, as well as to strengthen EU Single Market
integration, more labor, goods, and investment mobility between EU countries is needed:
labor mobility should be facilitated and administrative burdens levied.24
Even though
freedom of movement is a very challenging right and needs complex and well-prepared
policies, it is considered vital for the European Single Market.25
Introducing a more
universal unemployment and pension system would lead to an improvement in the
socio-economic situation of temporary workers; however, given the fiscal situation
of most Member States, social expansion is impossible and, therefore, solutions cannot
require any financial involvement.26
The new European Social Model must be financially
as well as socially sustainable, which requires great care with its creation. The current
situation is often considered as a crisis that can be overcome through the right adjustments.
19 Konfederacja Lewiatan (2016)
20 Euractiv (2016)
21 EUobserver (2016)
22 CEPS (2016)
23 Independent (2017)
24 OECD (2016)
25 CEPS (2016)
26 Eichhorst, W. et al. (2016)
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European Commission President Jean-Claude Juncker, in his White Paper released
on March 1, 2017, acknowledges that the European population and economy are both
shrinking; therefore, Member States must work together even more now than before.
The White Paper addresses the EU’s current issues (e.g. the impact of new technologies
on society and jobs, globalization, security concerns, and the rise of populism) and
presents five different scenarios of the future of the Community. Its aim is to launch
a debate about the future of Europe and the EC will contribute to it with reflection papers
(among others, about developing the social dimension of Europe) in the months to come.27
27 EuVisions (2016)
16. CASE Working Paper | No 1 (2015)
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The conceptualization of social harmonization takes its origins from several forces,
such as the recent changes in European legislation (Directive 96/71/EC of the European
Parliament and of the Council of 16 December 1996 concerning the posting of workers
in the context of provision of services); the debate on upward social convergence;28
and the recent changes in the definition of the minimum wage.
The elements of social harmonization proposed for analyses are mainly based on the
European Labour Mobility Package and, in particular, on the proposed changes in the
Directive of Posted Workers. Due to data constraints, the availability of information,
and methodological suitability, the following elements of social harmonization are
considered in this study:
1. European minimum wage;
2. harmonization in SSC; and
3. harmonization in labor taxation.
1. European minimum wage
Estimating and building a European minimum wage is an extremely challenging
process due to the complicated rules of this measure implemented at a national level.
In European countries, the minimum wage is defined by various factors – notably,
overall wage levels, cost of living, average and median income and earnings, the defini-
tion of the poverty line (the minimum wage should be above the poverty line), and the
definition of low wages (50 or 60% of national average earnings) (see Table A1 in Annex 1).
Of the 28 Member States, 22 have a statutory/universal minimum wage (see Table A1
in Annex 1). In the EU countries that do not have a statutory minimum wage (Austria,
Cyprus, Denmark, Finland, Italy, and Sweden), we find a wide coverage of collective
bargaining and high trade union density (Denmark, Finland, and Sweden), as well as
mandatory membership to employer associations, such as in Austria, or jurispruden-
28 Grand Duchy of Luxemburg (2015)
3. Setting the context
of social harmonization
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tial practice, like in Italy.29
Table A1 of Annex 1 provides an overview of the differences
in minimum wages in EU countries. All workers employed and exercising their profession
on the territory of one of the 22 countries having implemented a minimum wage are
entitled to it; however, Germany and France implemented specific policies in 2015
which have recently been subject to controversy.
In 2015, Germany introduced a minimum wage for all employees working in Germany,
regardless of where their employer is registered. This new rule is relevant for the
international transport, and international road transport sectors in particular, as it obliges
all transporters for whom Germany is a country of transit to abide by the minimum
wage rule. That same year, France decided to follow Germany’s lead, but instead focused
on the road and fluvial transport sectors, adopting a law according to which “any driver
engaged in cabotage operations during international transport, will benefit from the
social rules and the minimum wage in France. Foreign carriers, who work in France with-
out providing the required certification, will be prosecuted for illegal work.”30
France’s law
aims at tackling social dumping.
2. Social security contributions
Under EU regulations regarding the coordination of social security systems, a person
residing in a country other than the one in which he or she was born is subject to the social
security system of one country at a time. Combining the right to social security with freedom
of movement for intra-EU migrants and posted workers has been one of the major concerns
for EU Member States. To guarantee both principles, the EU thought it necessary to adopt
social security measures which prevent EU citizens working and residing in a Member State
other than their own from losing their social security rights. To illustrate this idea, a worker
posted from Portugal or Poland to the Netherlands, earning the same net income, can save
an employer up to 25% on labor costs through differences in social security payments.31
Therefore, an important debate is being raised on the issue of social dumping and the
necessity to protect workers’ rights and standards.32
This is one of the points addressed
in the debate on social harmonization.
In response to this debate and postulates, we assume that social harmonization will
set a European minimum rate for SSC, which would have to be imposed on salaries. Its
precise rate will be assessed when creating the hypotheses.
29 DG for Employment, Social Affairs and Inclusion (2016)
30 Drive Europe News (2016)
31 European Trade Union (2016)
32 European Trade Union (2015)
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3. Labor taxation
A wide variation in the tax wedge exists between European countries. It ranges from
somewhat below 20% in Malta to just over 50% in Belgium. Labor taxation is among
the highest in Belgium, Hungary, France, Germany, and Italy (Chart A1 in Annex 2).
Such high differences between EU countries give employers an incentive to benefit
from lower taxes being paid in different countries. This might be especially the case for
specific social groups such as low-skilled/low-income earners or the elderly.
Despite that labor taxation is the sole responsibility of EU Member States, the debate
about labor tax harmonization is taking place at different EU levels. For example, the very
recent staff working document of the European Commission33
states that tax competition
is being observed at the EU level due to globalization processes. It deeply affects
mobile capital and might cause a capital outflow. As a solution, tax harmonization could
be proposed as a relevant tool in fighting this phenomenon. Therefore, we presume that
some changes in the harmonization of labor taxation would be recommended at the EU
level for social harmonization purposes. Despite our lack of knowledge of the exact
terms of the Labour Mobility Package, we are going to test the impact of harmonized
labor taxation on European labor market performance, because we assume that
a European minimum rate of labor tax imposed on labor will be proposed in the social
harmonization project.
33 European Commission (2015b)
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4.1 Econometric model
The aim of this study is to examine the effect of the implementation of upward social
harmonization on labor market performance, measured by employment, unemployment,
and participation rates at the European level. The model adopted in this study is based
on diverse macroeconomic studies on this issue,34
and aims at assessing the impact
of labor taxes on labor market outcomes in a cross-country perspective.35
We decided
to employ the Arellano-Bond dynamic panel data regression model, which allows us to
obtain a consistent generalized method of moments (GMM) estimator for the parameters
of moment conditions in levels. The reasons for implementing this model are twofold. Firstly,
this technique allows us to correct for the correlation between the unobserved panel-level
effects and the lagged dependent variables. Secondly, previous empirical studies36
note
that this is the best model to handle the difficulties regarding the identification of robust
correlations between labor market performance and taxation policies, because of missing
controls and of the possible endogeneity of policies and country-specific institutions.
Therefore, the regression model takes the following form:
where y is the employment, unemployment, and participation rates, respectively, in time t
and country i. j stands for the specific subsample of the population (50+). SH is a dummy
variable equal to one if an upward change in labor taxes has been implemented and is ob-
served in year t, country i, and subsample j. α and ɣ are, respectively, a time invariant
country fixed effect and a time dummy, which accounts for the time effect common to all
34 Daveri, F., Tabellini, G. (2000), Vork, A. et al. (2007), Cristescu, A. et al. (2016)
35 Dolenc, P., Laporsek S. (2010)
36 European Commission (2011)
4. Methodology
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countries. Xt,i includes time varying additional controls specified in a Table 2 below. The
use of time and country fixed effects in the regression model partially copes with the
misspecification problems discussed above.
We assumed that the tax variables have an impact up to two years after the reform.
This allows for more flexibility in the detection of the impact, which can realistically be
expected in a longer term. Thirdly, besides country fixed effects, year fixed effects are
also introduced. This way, market cycles affecting all European countries in the same
period are controlled for.
The regression specification was subject to several robustness checks and we con-
firmed that the results seem robust.
In this paper, we use annual data for 27 European countries37
for the period 2000–2012.38
The samples used include people aged 15–64 and people aged 50–64. The information
about the changes in the tax systems was drawn and merged from the LABREF database.39
Information about trade and foreign direct investment (FDI) comes from the UNCTAD
database.40
4.2 Variables
The analysis focuses on the employment, unemployment, and participation rates for
the whole population aged 15–64 and for the working group aged 50–64, separately. Three
dependent variables are considered: firstly, unemployment rates, defined as the ratio
between the number of unemployed and the sum of the unemployed and employed
(derived from Eurostat statistics); secondly, the employment rate, defined as the number
of employed over the total number of respondents; and thirdly, the inactivity rate,
defined as the percentage of people who are outside the labor force over the total
population. The same dependent variables are constructed for people aged 50+ from
Eurostat statistics. The definitions of the dependent variables are described in Table 1
below.
37 Croatia is excluded from the study due to a lack of data
38 Please note that data were missing for some European countries, such as Croatia, Bulgaria, and Romania. Data were
approximated using Eurostat national statistics.
39 Data retrieved from the LABREF database
40 Data retrieved from the UNCTAD database
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Table 1: Definitions of dependent variables
The explanatory variables are presented in Table 2 below. As our approach consists
of panel data macro-econometric analyses, we can include several macroeconomic
factors that are specific to each country and which are assumed to affect labor market
outcomes. We include: gross domestic product (GDP), FDI, trade openness, and inflation
rate. According to the literature, GDP is expected to significantly and positively affect
labor market outcomes.41
Inflation rate, on the other hand, is assumed to negatively
affect the employment rate.42
Globalization, which is approximated by the trade openness,
might affect the labor market outcomes in an ambiguous manner.43
Nevertheless, it is
a significant factor influencing labor market outcomes, and, furthermore, is a relevant
factor affecting the discussion about social harmonization. Other country specific
variables included in the study are: average age in a country, the proportion of people
with a higher education, the proportion of the employed with a permanent contract,
the proportion of immigrants, and the share of government expenditures as a percentage
of GDP.
41 Seyfried, W. (2011), Andreica, M.E. et al. (2011)
42 Andreica, M.E. et al. (2010)
43 Dimian et al. (2013)
DEPENDENT VARIABLE DEFINITION
Unemployment rate The ratio between the number of unemployed and the sum
of the unemployed and employed (according to the EU LFS database)
Employment rate The number of employed over the total number of respondents
Inactivity rate The percentage of people who are outside of the labor force
over the total population
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Table 2: Definitions of explanatory variables
Social harmonization is defined by three dummy variables: PIT, SSC, and a minimum
wage. As we are discussing upward social convergence, the impact of an increase in all
these measures is considered. Table 3 below presents how these variables were created
and are included in the model. Our information was drawn from the LABREF and UNCTAD
databases and merged with data from with the EU LFS and Eurostat databases.
Table 3: Definitions of variables
EXPLANATORY VARIABLE DEFINITION
GDP Real GDP per capita, in country i at year t, euro per inhabitant
FDI Inward FDI stock as a percentage of GDP (with GDP expressed as an index,
where 2005=100), in country i at year t
Trade openness Trade openness indicators, measured as a percentage of GDP,
in country i at year t
Inflation rate Consumer price index (CPI) with the base year 2000, in country i at year t
Age Average age in country i and year t
Higher-education Proportion of people with a higher education, in country i at year t
Tenure Proportion of the employed with a permanent position, in country
i at year t
Immigrants Proportion of immigrants, in country i at year t
Public Total general government expenditures as a percentage of GDP, in country
i at year t
Variable Definition
Increase of PIT = 1, if PIT has increased; =0, otherwise
Increase of SSC = 1, if any element of SSC has changed and caused an increase of SSC
Increase of minimum wage =1, if the minimum wage has increased
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5.1 Overview of labor market performance in the European Union
There are large differences in the level of labor taxation among EU Member States,
and this is a main reason behind the intense debate surrounding social harmonization
in the age of globalization. According to the Organisation for Economic Co-operation
and Development (OECD), the tax wedge measures the extent to which tax on labor income
discourages employment.44
Among EU/OECD countries in 2015, people working in Belgium,
Germany, and France were subject to the highest tax levels, whereas those in Ireland,
the UK, and Poland are taxed the least (see Chart A1 in Annex 2). Similarly, according
to Eurostat, if we consider only low-wage earners, among all EU countries, they are taxed
the most in Belgium, Hungary, Austria, and Germany. Tax wedge levels are the lowest
in Malta, Ireland, the UK, and Luxembourg. (see Chart A2 in Annex 2).
There are also significant differences in the level of the minimum wage (Table A1
in Annex 1). Among the countries applying the minimum wage level in the EU in 2014
and 2015, the lowest wage levels are found in Bulgaria and Romania, followed by other
CEE countries. France, Ireland, Germany, Belgium, and the Netherlands have almost
equal levels of the minimum wage. The country with the highest minimum wage level is
Luxembourg, both in 2014 and 2015. If we compare this data with the minimum relative
to average wages of full-time workers ratio in EU/OECD countries, we notice the highest
ratios in France, Slovenia, and Portugal, whereas the lowest can be found in Spain,
the Czech Republic, and Estonia (see Chart A3 in Annex 2).
Regarding median hourly earnings, both in euro and in terms of the purchasing
power standard (PPS), the countries with higher levels are Denmark, Luxembourg, and
Ireland. By contrast, we observe lower levels in Bulgaria, Romania, Latvia, Lithuania,
Slovakia, Estonia, Poland, and Slovenia (see Chart A4 in Annex 2).
Expenditures on social protection per inhabitant in absolute values in CEE countries
are the lowest among the EU. Countries that spend the most on social protection per
44 OECD (2017)
5 Empirical analysis
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person are Austria, the Netherlands, Luxembourg, France, Germany, and Denmark (see
Chart A5 in Annex 2). Likewise, if we take into consideration the percentage of GDP
spent on social protection by country in 2014, more or less, the same countries spent
the most: France, Denmark, Finland, the Netherlands, and Belgium (above the EU-28
average). At the end of this list, we find Latvia, Lithuania, Romania, and Bulgaria (see
Chart A6 in Annex 2).
Although there are no big gaps among Member States, we clearly see that employment
levels are the highest in countries with high minimum wages or with no minimum wage
at all: Sweden, the Netherlands, Germany, and Denmark. We also observe here
a surprisingly high score for the Czech Republic. However, regarding unemployment,
the gaps are much more significant: the highest unemployment can be found in Greece
and Spain in both age categories, followed by Portugal, Cyprus, Slovakia, and Finland.
The situation is similar, but not the same, regarding inactivity rates, which are the highest
in Malta, Romania, and Greece for the group of those aged 50+, but are also surprising-
ly high in Luxembourg. For people aged 15–64, it is Italy, Romania, and Croatia (Table A2
in Annex 1).
In summary, we can see that although in CEE countries, where labor taxation, social
protection level per inhabitant, and minimum wage are usually lower than the EU
average, labor market participation is also quite low (except for the Czech Republic). How-
ever, we cannot draw any conclusions from these observations as other factors may
be influential, and it cannot be considered as a simple dependence. For instance, Spain
and Greece have medium-level tax wedges, but both have higher levels of unemployment.
Therefore, there may be no relation between these levels, and this is a conclusion that
we will prove in the next section in our econometric analyses.
5.2 Relationship between social harmonization and labor market
performance
The aim of this part of the report is to empirically examine the relationship between
upward social convergence and labor market outcomes. The first part of this subchapter
presents the results for the whole population, and the second subchapter concentrates
on those aged 50+.
The whole population. The main results of the econometric analyses confirm that GDP
has the greatest impact on labor market outcomes, confirming the economic theory
on the direct link between macroeconomic output and level of employment (see Table
4 below). An increase in GDP per capita by one euro per inhabitant increases the over-
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all employment rate by over 4%. When GDP per capita increases, the unemployment
rate decreases by about 3%. Trade openness seems to have a positive, but weak im-
pact on employment rate, while it is statistically insignificant for the unemployment rate
and inactivity rate. Also, the inflow of FDI seems to have very little impact on the
employment rate, and no statistical significance for other labor market characteristics.
The proportion of people with higher education is statistically significant, and as expect-
ed, increases the employment rate and inactivity rate and decreases the country un-
employment rate. Other variables describing country-specific characteristics are
statistically insignificant and their impact seems to be negligible.
Variables approximating the implementation of upward social harmonization at the
EU level seem to be statistically insignificant, and, if significant, the impact is relatively
low. An increase in SSC, PIT, or the minimum wage seems to affect the employment
rate very weakly in a negative way, whereas it has no statistical significance for the un-
employment or inactivity rate. It also appears that the impact is observed in the second
and the third year after the implementation of the change, and not earlier.
Variable Unemployment rate Employment rate Inactivity rate
Unemployment rate (t-1)/
Employment rate (t-1)/
Inactivity rate (t-1)
0.712
(10.48)***
0.728
(9.79)***
0.722
(9.57)***
SSC-increase 0.001
(0.65)
0.000
(0.15)
0.001
(0.78)
SSC-increase (t-1) 0.000
(0.20)
–0.001
(0.61)*
0.003
(1.38)
SSC-increase (t-2) 0.002
(1.09)*
–0.002
(0.95)*
0.001
(1.31)
PIT-increase 0.001
(1.84)
–0.001
(1.99)*
0.001
(0.02)
PIT-increase (t-1) 0.000
(0.41)
–0.000
(0.1)
0.002
(0.95)
PIT-increase (t-2) 0.001
(2.53)*
–0.002
(1.16)
0.000
(0.29)
Min. wage-increase 0.001
(0.43)
–0.003
(1.29)*
0.003
(1.79)*
Min. wage-increase (t-1) 0.003
(0.11)*
–0.002
(0.57)
0.002
(0.94)*
Min. wage-increase (t-2) 0.002
(1.29)*
–0.000
(0.48)
0.000
(1.68)
GDP –0.030
(0.41)**
0.044
(3.69)**
–0.071
(1.19)
Trade openness –0.021
(0.74)
0.017*
(0.087)
–0.021
(0.035)
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Table 4: Estimation results (population aged 15–64)
Robust z-statistics in parentheses; *** significant at the 1% level; ** significant at the 5%
level; * significant at the 10% level; (no star) statistically insignificant
Population aged 50+. Overall, the estimation results from the sample of people aged
50–64 reveal that this group is more reactive to macroeconomic and fiscal changes
(see Table 5). Similar to the estimations on the whole population, the higher the GDP,
which approximates economic well-being in a country, the higher the employment rate
and the lower the unemployment rate for those aged 50–64. Interestingly, labor market
performance for the population aged 50+ is slightly less responsive to GDP changes when
compared to the total population. The results are in line with other research findings
showing that in times of crisis, the elderly are not the group of people with the highest
risk of being dismissed.45
45 The reason behind this is the difficult situation of the young population in the labor market (i.e. zero-hour contracts and in-
secure situation in the labor market, among others). For more information, see the FP7 STYLE project: http://www.style-re-
search.eu/
Variable Unemployment rate Employment rate Inactivity rate
FDI 0.029
(0.094)
0.011*
(0.01)
0.001
(0.18)
Inflation rate 0.000
(0.121)
–0.022*
(0.172)
0.001
(0.001)
Higher-education –0.073
(1.97)**
0.052
(1.99)*
–0.031
(2.36)**
Tenure 0.118
(1.87)
–0.011
(0.23)
–0.068
(0.98)
Immigrants –0.025
(1.92)
–0.021
(0.45)*
0.027
(2.16)*
Public 0.001
(1.78)**
–0.001
(1.05)
–0.000
(0.71)
28. CASE Project Reports | Nr 487 (2017)
28
Interestingly, the openness of the economy, measured by the trade index, has a reverse im-
pact for the elderly when compared to the whole population. The higher the trade openness
index, the lower the employment rate of the elderly and the higher the unemployment rate.
In addition, the inflow of FDI also decreases the employment rate of the elderly. The results
confirm that with the inflow of new technologies, a negative effect on the labor market might
be expected in the short-run. The reasons for this might lay in frictional unemployment, which
is associated with the reallocation of workers across sectors, or the skill gaps that exist be-
tween the labor supply of the elderly and labor demand imposed by the introduction of new
occupations. Again, the results confirm that the elderly might be perceived as less attractive
in the labor market when considering their ability and willingness to become fast learners and
to participate in life-long learning activities.46
The higher the percentage of the highly educated among the elderly, the lower the
unemployment rate and the higher the employment rate. The same relation is observed
when estimating the impact of the percentage of people employed on a permanent
contract.
The impact of policies affecting social harmonization is statistically significant and
has a negative effect on the performance of the elderly in the labor market. An increase
in PIT or SSC decreases the employment rate of the elderly and increases unemployment
and inactivity rates. The negative impact of PIT and SSC increases is observed during
the next two years after the implementation of the reform. It underlines the long-lasting
effect of the reform on the performance of the elderly in the labor market.
These results are in line with other research findings on similar topics. In the last EU
report on tax reforms,47
it was proven that higher labor taxes have a detrimental effect
on vulnerable groups, which causes their exclusion from the labor market and, con-
sequently, social inequality. The results prove once again that the more elastic the
labor supply curve is, the more harmful the introduction of upward social convergence is
for labor market outcomes. As found in other studies,48
the elderly are a group that is
particularly responsive to changes in taxes.
46 MOPACT, 2016
47 European Commission (2014)
48 Siebertova, Z. et al. (2014)
29. CASE Working Paper | No 1 (2015)
29
The aim of this paper was to assess the relation between selected elements of the
social harmonization policy and the employment, unemployment, and inactivity rates in
the EU during the years 2000–2012 by using an Arellano-Bond dynamic panel data
regression model.
The main results of the study identified that the impact of changes in PIT and SSC on
unemployment, employment, and inactivity rates was, in the majority of cases, statistically
insignificant for the whole working population. In cases when it was significant, the im-
pact was weak. The variables that significantly affected labor market outcomes at the EU
level were related to market performance, trade openness, FDI inflow, and education
level of the population.
The impact of upward social harmonization differed for the population aged 50+.
It was statistically significant and had a negative effect on the performance of the elderly
in the labor market. An increase in PIT or SSC decreased the employment rate of the
elderly and increased unemployment or inactivity rates. The negative impact of PIT and
SSC increases was observed during the next two years after the implementation of
the reform. This underlined the long-lasting effect of the reform on the performance
of the elderly in the labor market.
Other variables that were also significant for labor market performance among the
elderly were related to market performance, trade openness, FDI inflow, the education
level of the population, as well as the share of people employed on a permanent contract.
In summary, changes in taxation, aimed at delivering the social harmonization of labor
taxes, played a minor role in determining the outcomes of the labor market on the whole
population. However, they had a significant impact on specific groups of people, like the
elderly, who were more at risk of being dismissed or who were less likely to work once
reaching the retirement age. With the aging of the European population and the European
attempts to increase the employability of the elderly, the introduction of upward social
harmonization might have a destructive effect on the measures undertaken in order to
improve the situation of the elderly.
6 Conclusions and policy
recommendations
30. CASE Project Reports | Nr 487 (2017)
30
Our policy recommendations are as follows. As the EC has already started to encour-
age tax reductions on labor, the EU should continue its trend of reducing the tax wedge,
and, instead of aiming at upward social convergence, should revise the level of social
convergence needed to maintain employment growth and decrease unemployment
and inactivity rates.
In addition, when developing social harmonization within Europe, policy makers
should pay special attention to the elderly and, in general, to the groups of people whose
labor market participation strongly depends on their marginal tax rates.
To conclude, the findings of this paper are, in general, in line with previous empirical
research, as empirical estimates confirm the effect of upward social harmonization on
employment growth. In addition, the study confirms that the disfavored groups are much
more at risk of any changes in the tax wedge than other groups. Therefore, labor market
policies aimed to boost employment should concentrate on increasing marginal gains
to work, especially for the elderly. It is also important to acknowledge the limitations
of these findings, due to the limited time series, possible omitted variables unaccounted
for in our estimation, and the relatively small variation among key variables.
31. CASE Working Paper | No 1 (2015)
31
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Annex 2
Chart A1: Tax wedge in EU/OECD countries, 2015 (total, % of labor costs)
Source: OECD
Chart A2: Tax wedge level (as % of total labor cost) on low-wage earners (i.e. sin-
gle persons without children earning 67% of the average wage), 2015
Source: Eurostat
0
10
20
30
40
50
60
0.0
10.0
20.0
30.0
40.0
50.0
60.0
EU28
Belgium
Bulgaria
CzechRepublic
Denmark
Germany
Estonia
Ireland
Greece
Spain
France
Croatia
Italy
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
UnitedKingdom
*Data for Cyprus not available
0
10
20
30
40
50
60
0.0
10.0
20.0
30.0
40.0
50.0
60.0
EU28
Belgium
Bulgaria
CzechRepublic
Denmark
Germany
Estonia
Ireland
Greece
Spain
France
Croatia
Italy
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
UnitedKingdom
*Data for Cyprus not available
39. CASE Project Reports | Nr 487 (2017)
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Chart A3: Ratio of minimum relative to average wages of full-time workers, 2015
Source: OECD
Chart A4: Median gross hourly earnings and purchasing power standard, all employees
(excluding apprentices), 2014
Source: Eurostat
32
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.0
5.0
10.0
15.0
20.0
25.0
30.0
EU28
Belgium
Bulgaria
CzechRepublic
Denmark
Germany
Estonia
Ireland
Spain
France
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
UnitedKingdom
Euro Purchasing Power Standard
*no data for Greece and Croatia
40. CASE Project Reports | Nr 487 (2017)
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Chart A5: Expenditure on social protection in purchasing power standard per
inhabitant in the EU, 2014
Source: Eurostat
34
0 2000 4000 6000 8000 10000 12000 14000 16000
EU 28
Belgium
Bulgaria
Czech Republic
Denmark
Germany
Estonia
Ireland
Greece
Spain
France
Croatia
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
United Kingdom
41. CASE Project Reports | Nr 487 (2017)
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Chart A6: Expenditure on social protection as a % of GDP, 2014
Source: Eurostat
35
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
EU28
Belgium
Bulgaria
CzechRepublic
Denmark
Germany
Estonia
Ireland
Greece
Spain
France
Croatia
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
UnitedKingdom
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Chart A7: Total receipts from taxes and social contributions (including imputed social
contributions) after deduction of amounts assessed but unlikely to be collected, 2015
Source: Eurostat
36
0.0 10.0 20.0 30.0 40.0 50.0 60.0
EU 28
Belgium
Bulgaria
Czech Republic
Denmark
Germany
Estonia
Ireland
Greece
Spain
France
Croatia
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
United Kingdom