ISSN 1018-5593 JÈun'-A^^^ U R O P E A N COMMISSION SCIENCE RESEARCH DEVELOPMENT iiiSüSBI Europeanisation of economic research EUR 17794 EN European Commission Europeanisation of economic research Mogens Dahl and Alan P. Kirman (eds.) with Herbert S. Buscher Keith Cuthbertson Roger Guesnerie Heinz König Stephen Martin Costas Meghir Domenico Mario Nuti Pierre Pestieau Mark P. Taylor Prepared under contract for the European Commission, Directorate-General for Science, Research and Development 'Human capital and mobility' programme March 1996 PÂRL EUROP. m£ N.C. / 1997 CI EUR 17794 EN LEGAL NOTICE Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information A great deal of additional information on the European Union is available on the Internet. It can be accessed through the Europa server (http://europa.eu.int) Cataloguing data can be found at the end of this publication Luxembourg: Office for Official Publications of the European Communities, 1997 ISBN 92-828-0823-8 fJ7~ZZ© Europea n Communitiesf, 1997 "Reproduction is authorized provided the source is acknowledged Printed in Italy , (Printed on white chlorine-free paper t Ï Foreword In deciding to support the present report on the "Europeanisation of economic research" the European Commission sought not only to solicit independent external opinion on the quality of Community funded research in the field of the economic sciences, but also to learn how this research fits into a broader context Clearly, no single report can deal with all aspects of this ambitious theme, and indeed the objective of this work was restricted to certain research fields where grants awarded by Community programmes SPES (Stimulation Plan for Economic Science) HCM (Human Capital and Mobility) and ACE (Action for Co-operation in Economics) have supported co-operation and mobility at European level for research conducted during the first half of the 1990s. We realised that many of the benefits of such research become clear only after some years, and that a review was needed in order to identify these benefits, before they become too dispersed over time. On the other hand, there might also be lessons to be learnt or in the perspective of developing new insights as regards best practice. We regard this report, therefore, as one of the inputs to the general debate on the quality of EU funded activities in this area, and it should be considered carefully alongside contributions from elsewhere - including the rigorous programme evaluations that we now conduct. It is interesting to note that in addition to the detailed analyses set out in the report the authors identify two key trends: that Europe is strengthening its capabilities and intellectual creativity vis à vis the USA, who have dominated this field of research; and, furthermore, that the orientation of research in Europe is shifting from national preoccupations towards areas with a distinct European dimension. Moreover, Community funded programmes mentioned above are cited as having played a significant role in this evolution. I commend this report, therefore, to readers wishing to explore the issue of the Europeanisation of economic research from various perspectives offered by the authors. Achilleas Mitsos Director Programmes "Training and Mobility of Researchers'7 and "Targeted Socio-Economie Research7' CONTENTS Page Contributors .... 1 Introduction . .. 3 Roger Guesnerie I Summary and Conclusions Mogens Dahl and Alan Kirman 1. INTRODUCTION 5 2. GENERAL TRENDS 7 3. EXAMPLES 8 4. CONCLUSIONS 12 4.1. Areas of research strength . ...... 12 4.2. Issues for research policy . 13 5. RECOMMENDATIONS 14 II European Programmes in Economics, Facts and Emerging Issues Mogens Dahl 1. INTRODUCTION „ ..... ........ ....... 17 ?, FUNDING OF PROGRAMMES IN ECONOMICS 19 3 OBJECTIVES AND SCOPE OF EUROPEAN PROGRAMMES IN ECONOMICS 20 4, RESEARCH FIELDS OF SPES AND HCM 22 5. TYPES OF GRANTS 24 fi EMERGING ISSUES .'. 27 7. 28 III Real macroeconomics, Convergence and Applied Econometrics Heinz König and Herberts. Buscher 1. INTRODUCTION 29 2. A FORMAL OVERVIEW OF SPES-FUNDED ACTIVITIES 29 3. RECENT DEVELOPMENTS IN MACROECONOMICS 31 4. EU-RESEARCH FUNDING: PROBLEMS AND PERSPECTIVES 39 CONTENTS Page IV Microeconomics and the relationship between micro- and macro phenomena Alan Kinn an 1. INTRODUCTION 43 2. TRENDS 44 3. MICRO AND MACRO PHENOMENA 45 4. CONCLUSIONS 52 Money and Capital Keith Cuthbertson and Mark P. Taylor 1. INTRODUCTION 55 2. RESEARCH ON THE EUROPEAN MONETARY SYSTEM 57 3. RESEARCH ON EUROPEAN MONETARY ONION 57 4. RESEARCH ON FISCAL POLICY AND MONETARY UNION 62 5. RESEARCH ON FINANCIAL SERVICES IN THE E.Ü 64 6. CONCLUSIONS AND RECOMMENDATIONS 65 VII Recent Developments in Public Economics Pierre Pestieau 1. INTRODUCTION 67 2. THE STATE OF PUBLIC ECONOMICS IN EUROPE 67 3. RECENT DEVELOPMENTS 69 4. CONCLUDING COMMENTS 71 VI Empirical Microeconomic Research on Labour Markets by Researchers in the EU: A Review CostasMeghir 1. INTRODUCTION 75 2. LABOUR SUPPLY AND PARTICIPATION 76 3. TRAINING AND LABOUR MARKET OUTCOMES..... 78 4. INTERTEMPORAL SUBSTITUTION IN CONSUMPTION AND LABOURSUPPLY 79 5. LABOUR DEMAND 79 6. WAGE DETERMINATION 80 vi CONTENTS Page 7. EARNINGS AND OCCUPATIONAL MOBILITY 82 8. UNIONS, WAGES AND PRODUCTIVITY 82 9. LABOUR MARKET REGULATION AND UNEMPLOYMENT 82 10. MIGRATION ....... 83 11. HISTORICAL STUDIES 83 12. EMPIRICAL RESEARCH METHODS 83 13. SPES FUNDING AND EMPIRICAL MICROECONOMICS RESEARCH IN LABOUR ECONOMICS 84 VIII Research in Industrial Economics in Europe Stephen Martín 1. INTRODUCTION .'. 85 2. STRUCTURE 87 3. CONDUCT 88 4. PERFORMANCE 90 5. INDUSTRIAL ECONOMICS AND INTERNATIONAL TRADE 91 6. INDUSTRIAL ECONOMICS AND MACROECONOMICS 91 7. METHODOLOGY 91 8. DIRECTIONS FOR SUPPORT FOR EUROPEAN RESEARCH IN INDUSTRIAL ECONOMICS . , 92 IX The Transformation of post-communist Economies Domenico Mario Ñutí 1. TABULA RASA 93 2. INTERNATIONAL INSTITUTIONS 94 3. OTHER OLD AND NEW PROTAGONISTS 95 4. EU RESEARCH FUNDING 97 5. ECONOMIC THEORY OF THE TRANSFORMATION 98 6. MACRO-ECONOMIC STABILISATION 99 7. GRADUALISM VERSUS SHOCK THERAPY 99 8. FISCAL AND MONETARY POLICY 100 9. EU RESEARCH FUNDING: ACHIEVEMENTS AND NEEDS 100 STATISTICAL APPENDIX 101 REFERENCES 121 vu CONTRIBUTORS Herberts. Buscher Is economic researcher at Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim. He studied at Freie Universität Berlin. Main research areas: monetary policy, exchange rate theories stabilisation policies, and business cycle research. Keith Cuthbertsoa is Professor of Financial Economics at University of Newcastle-upon-Tyne and holds degrees in physics (University of Sussex) and economics (University of Manchester). Main research areas: monetary risk in financial markets, financial asset decisions, asset pricing and applied econometrics. He has worked at HM Treasury and Bank of England (consultant). MogensBahiìs an independent consultant in research policy based in Brussels and served before that as secretary for the Danish Council for Research Policy and for the European research programme evaluation panels. Degrees in economics (University of Copenhagen) and public administration (Copenhagen Business School). Main activities currently: project management for European innovation and research programmes. Boger Guesnerie is Directeur de Recherches at Centre National de. la Recherche Scientifique (CNRS), Directeur d'Etudes at the Ecole des Hautes Etudes en Sciences Sociales (EHESS), Director of DELTA (joint research unit CNRS, EHESS, Ecole Normale Supérieure) Paris. He was chairman of the Selection Committee for Economics and Social Sciences of the Human Capital and Mobility (HCM) Programme and member of the Evaluation Committee for the Stimulation Programme for Economic Sciences (SPES). His main research areas are: general equilibrium theory, theory of organisation, welfare economics and public economics, macro-economic theory. He has been President of the European Economic Association (1994). Alan Birman is Professor of Economics at the Université d'Aix-Marseille III, Directeur d'Etudes at the Ecole des Hautes Etudes en Sciences Sociales and member of the Institut Universitaire de France. His specialities are micro• economics, in particular the relation between micro and macro-economics, price formation and the emergence of market structure. His first degree is from Oxford and his PhJ). from Princeton. Heinz Kõnigte Professor of Economics and Econometrics at Universität Mannheim and Scientific Director of Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim and has been member of HCM selection committee. Main research areas: macro-economic modelling and innovation research. Stephen Martin is Director at Centre for Industrial Economics at the University of Copenhagen. He holds degrees from Michigan State University, USA, and Massachusetts Institute of Technology, USA. His research interests include all areas of industrial economics, with current emphasis on comparative competition policy, empirical tests of market Integration in the European Union, and experimental tests of oligopoly theory. Costas MeghJris Professor of Economics at University College London and deputy research director of the Institute for Fiscal Studies. His main research areas are empirical labour economics, the investment behaviour of firms, consumption behaviour and liquidity constraints, demand analysis and micro-econometrics. Domenico Mario Nuti is Professor of Comparative