Research interests & news

International and public finance, monetary policy, labour markets, development economics and applied econometrics
 
 
Recent research projects
  1. Demographic pressure versus labour market space across the globe - The optimal policy mix of increasing labour market participation, migration or capital inflows to maintain fiscal sustainability
  2. Ageing labour forces and the reduction of working hours - Their impact on labour productivity in services and goods sectors in the GIIPS
  3. Composing a book publication of the papers presented at the  MRM Workshop International financial integration of Mediterranean economies: Recent developments and future opportunities
  4. Solidarity in social security systems, in particular pensions - some history and cliometric results
  5. Albania - A European economy (in Dutch: Albanië - Een Europese economie) - booklet



According to the life-cycle theory, countries with high and rising youth ratios or high and rising old-age ratios tend to have low savings relative to investment, which depresses their capital outflows. This paper puts life-cycle theory to the test and studies the impact of demographic change on international capital flows in the Middle East and North Africa (MENA) and the Southern European countries Greece, Italy, Spain and Portugal (GISP). These two regions are asymmetric in that MENA has a young population whereas the population of GISP has been ageing rapidly. Moreover, MENA has a lower standard of living an is a much more closed economy, which may effect the ability to save and its impact on cross-border capital flows. The empirical analyses in this paper cover the period 1980-2011 and partly support the life-cycle theory for these two regions. Youth rates depressed domestic savings significantly in both the MENA and GISP regions, while ageing as well as population growth had a positive impact in the GISP region. Also, domestic savings significantly caused international capital flows.


World Economics 13(2), 15 June 2012, before published as EERI working paper

This paper investigates the fiscal pressure from demographic change in relation to the labour market space for fifty countries that cover 75% of the world population. The pressure-to-space indicator ranks Poland, Turkey and Greece high. Apart from Turkey and India, developing countries rank low due to low spending on the old (pensions, health care) and the young (education, family costs). Peculiarly, economies with higher pressure have more space. The hypothesis that ageing economies have started using their space in anticipation to higher demographic pressure is rejected. Raising the retirement age in developed economies by five years alleviates the pressure by almost 30% and creates 10% more labour market space. 



On top of the sovereign debt crisis in the European Union, demographic change is exerting enormous pressure on public finances. We analyse four policy options: lowering pension benefits, increasing labour market participation of the native population, immigration and participation of older people. Our results show that the most publically indebted EU economies face the highest increases in public spending on the retiring baby boom generations over the coming decades. Fortunately for these economies, it turns out that adjusting their labour market participation is easier than for their neighbouring economies within the EU. Increasing labour market participation to 60% keeps several countries largely out of the woods.


Bessensap - Thanks to the baby boom (in Dutch: Met dank aan de baby boom), interview at Hoe?Zo!Radio (48th minute)The Hague, 4 June 2012

De Nederlandse verzorgingsstaat staat onder druk, maar hoeft niet te bezwijken. De dreigende onhoudbaarheid is van voorbijgaande aard. Als aanpassingen op de arbeidsmarkt tijdig zullen plaatsvinden, is het vergrijzingsprobleem rond 2040 geweken.

Ons Nederlandse sociale stelsel is genereus. Met dank aan de babyboom generatie. Deze breidde het stelsel uit na de Tweede Wereldoorlog. Hun vele handen maakten licht werk en de werkenden konden met groot gemak de premies betalen om de niet-werkenden te financieren. In de vorm van kinderbijslag, uitgaven voor onderwijs, gezondheidszorg en pensioenen. Sinds de eerste babyboomers in 2010 met pensioen gaan, keert het tij. Dit is slechts van voorbijgaande aard, mits de overheid in staat is de arbeidsparticipatie te blijven verhogen tot 2040. Nederland heeft voldoende arbeidsmarktruimte om de pot met premies te blijven vullen en staat er niet slecht voor vergeleken met 49 andere (welvarende) landen.


Demographic change across the globe puts pressure on labour markets and public finances. Most studies on ageing focus on the projected development of the old age dependency ratio, being the ratio of persons 65 or older relative to the working age population. This ratio gives a very incomplete picture of the (fiscal) pressure from demographic changes. In this study, besides the share of the dependent population composed of the young and the old, we also include the share of the working age population that is not active on the labour market, labelled as the labour market space. By analysing 21 developing and 29 developed economies across the globe, we cover 75% of the 9.3 billion people that the United Nations projects for the whole world in 2050. A new indicator, relating demographic pressure from fiscal spending to the available space at the labour market, enables us to quantify and compare the pressure-to-space across countries over the time span 2010-2050. The indicator points out that Poland, Turkey and Greece are most under pressure. Developing countries, such as Uganda, the Democratic Republic of Congo and Tanzania will experience a very low pressure up to 2050 in case their fiscal spending per young and elderly person remains at the current levels. In most of the countries under high pressure there seems to be room for using the labour market space by, for instance, working more hours or increasing the retirement age, as this will alleviate the fiscal pressure. This suggests a policy trade-off between maintaining publicly financed services to the dependent population and maintaining labour market space.



On top of the sovereign debt crisis in the European Union, demographic change is exerting enormous pressure on public finances . We analyse the implications of four policy options for 21 EU countries: lowering pension benefits, increasing labour market participation, immigration or labour market participation of old age persons. Our results show that the most publically indebted EU economies face the highest increases in public spending on the retiring baby boom generations over the coming decades. Fortunately, for these economies, it turns out that they can more easily adjust their labour market participation than their neighbouring economies within the EU.



Should South-Mediterranean economies continue their financial integration in the world economy, considering their current stance and in view of the experiences of developed economies with the global financial crisis? The economies of the North-African rim, that is Morocco, Algeria, Tunisia, Libya and Egypt have become more exposed to the global economy during the 1990s and 2000s. The same holds to some extent for the Middle Eastern economies Palestine and Syria, while Jordan and Lebanon have become very open economies.In light of the unprecedented developments in the financial sectors of developed economies in the years 2008-2009 and in view of the current political Arab upheaval, this paper reviews the pros and cons of financial integration. It analyses financial integration indicators, as well as financial stability, and compares the South-Mediterranean region with other regions worldwide. Also available in hard cover.

The volatility of exchange rates leads to a reduction of international trade volumes, especially in emerging economies including the South Mediterranean countries. This study discusses the impact of exchange rates on bilateral South- North trade flows, which comes timely after the increased volatility between the Euro and Arab national currencies after the global financial crisis of 2008 that led to a sharp reduction at that time. We investigate the impact of exchange rate volatility on trade using monthly time series for the last ten years from 2000 up to 2011. By means of a Vector Auto Regression model with eXogenous variables (VARX) we estimate the responses of bilateral exports and imports to exchange rate fluctuations between South and North Mediterranean economies. A sample of three South Arab countries is selected including Egypt, Jordan, and Morocco. Causality tests are conducted to test the hypotheses. 

Our results show that the exports of goods from Egypt to the European Union decreases in comparison with the baseline by about 3% in case of an appreciation of 10% of the Egyptian pound vis-à-vis the euro, while the imports of Egypt from the EU increase by almost 10%. Also for Morocco, the imports from the EU react much stronger than the exports to the EU  to a similar size appreciation of the Moroccan dirham. Jordan is less import-dependent, though it  reacts strongly in terms of exports if its dollar-pegged currency appreciates vis-à-vis the euro. Finally, we conclude that the direct and indirect impact of actual changes in exchange rate is quite high.
  


Most studies on ageing focus on the developed economies and on the old-age dependency ratio. This ratio gives a very incomplete picture of the (fiscal) pressure from demographic changes. In this study, we monitor the developing economies and include the share of the working-age population that is not active on the labor market and the public expenditures to the young and old. A new pressure-to-space indicator points out that countries like Greece, Austria, Italy and Poland are most under pressure, whereas developing countries Egypt, Nigeria, South Africa and Pakistan will experience a very low pressure up to 2050.



While EU leaders are drafting a fiscal compact, the problem of intra-European real exchange-rate misalignments remains. This column argues that reducing imbalances implies a focus on competitiveness, and hence on the alignment of nominal-wage growth with labour-productivity growth.


Journal of Knowledgement Management, Economics and Information Technology

Posted on this website on 19 December 2011

This study provides an overview of the pattern of the gross capital flows of the current and capital accounts of the balance of payments of the group of six Gulf Cooperation Council countries during the last decade that includes the global crisis years. It benchmarks the GCC countries with the other oil-exporting OPEC countries that have a comparable size of natural resources. The GCC countries’ high investments in the world economy financed by their abundant income from oil revenues, showed their remarkably high degree of trade and financial integration in the world economy. Thanks to policies geared towards opening up borders, the GCC countries have imparted a significant stimulus to the world economy, to a much greater extent than other oil exporting countries in similar conditions. Aspects of globalization, trade and financial integration, 
such as the dependence on oil, “Dutch disease”, regional integration, foreign direct investment and cross-border assets and loans are addressed. The results show that the impact of the crisis has reverted international capital flows of the GCC, in particular cross-border bank loans, deposits and foreign direct investment. However, current and future global policymaking needs more timely and consistent statistical information.


Journal of Economics and Econometrics
 
Posted on this website on 7 December 2011

The demographic structure of Egypt has the form of a pyramid, indicating that labour supply will grow at a relatively high rate for many years to come. Unless emigration flows will rise, Egypt needs to create jobs at a much higher pace than most other countries around the globe to absorb the new entrants at the domestic
labour market. Adding to this is the currently high share of 30-40% of the Egyptian employees working in the rather inefficient public sector. In order to quantify future developments at the labour market, this paper presents a labour supply model to analyse the impact of the ongoing demographic supply shocks on unemployment in Egypt. The findings indicate that the demographic labour supply will increase
unemployment in the short term as the Egyptian labour market will not be able to absorb the demographic labour supply, unless the Egyptian economy grows steadily at least at 5% for many years in a row. In the long term, the employment dividend can be reaped by productivity growth increases if the labour market starts functioning. The findings also point out that, for growth to accelerate rapidly, job creation should occur in the private and not in the public sector. The large public sector has been driving up government expenditures disproportionably, not only because of the existence of the high number of people employed in the public sector but also because of excessive public wage increases.
 


Eurocommissarissen moeten veel grotere bevoegdheden krijgen om in te grijpen in het economisch beleid van lidstaten. Verdere Europese integratie is nodig om een herhaling van de economische crisis zoals we die nu meemaken te voorkomen. Mede op voorstel van Nederland is een eerste stap gezet door eurocommissaris Olli Rehn de bevoegdheid te geven in te grijpen in het begrotingsbeleid van landen. Soortgelijke bevoegdheden zijn nodig om stijging van de ambtenarensalarissen en uitkeringen in toom te houden, de omvang van de publieke sector te beperken en de vergrijzingsproblematiek daadwerkelijk aan te pakken.



Will EU-countries co-finance their ageing costs? (In Dutch: Gaan de Polen en Grieken straks van ons geld met pensioen?), Me Judice on 7 November 2011

The current euro crisis shows that countries in the euro area with excessive public deficits and debts make other countries of the area co-owners of the problems. Ageing puts an additional pressure on the public finances in most economies. This article shows that EU-countries facing severe ageing pressure, like Poland and Greece, still have space at their labour markets to accommodate the additional costs.



NIAS-seminar The EU-crisis - An anthropologist and macro view, with Erik Bähre, 3 November 2011

Although the European sovereign debt and banking crisis is hampering economic growth, this unprecedented
storm catalyses highly needed reforms that can constitute new building blocks in the formation of the European
Monetary and Political Union. European governance versus sovereignty, morality and legitimacy of free market principles, as well as concerns about solidarity, social hierarchy, and religious insecurities play a main role.

This seminar approaches the issues at stake from two very distinct angles, being the economic anthropology and
macro policy view. How do they examine financial crises and how do they formulate concerns and future
scenarios? In a nutshell, we will address the resemblance with past financial crises, the recent borrowing hype, the anthropologists view on finance, EU governance as to the fiscal and monetary union, the wishes of the Occupiers, basic versus casino banking as well as bank ring-fencing, and the role of cultural differences in EU-decision making.



How further? (In Dutch: Hoe gaan we nu verder?), Dutch Financial Times on 25 October 2011

The protests of the Occupy-movement against greed in the financial sector contrasts sharply with the soft way in which the sector discusses its own functioning. Why is the citizen bleeding for the Greek fraud while the banking sector is still rewarded for its bad conduct?



Better safe than sorry - Individual risk-free pension schemes in the European Union

Posted on this site on 20 September 2011 - Revised version February 2012 - Published in Contemporary Economics, 2012, Vol 6(3):22-37

Variations between the diverse pension systems in the member states of the European Union hamper labour market mobility, across country borders but also within the countries of the European Union. From a macroeconomic perspective, and in the light of demographic pressure, this paper argues that allowing individual instead of collective pension building would greatly improve labour market flexibility and thus enhance the functioning of the monetary union. I argue that working citizens would benefit, for three reasons, from pension saving in a risk-free savings account. First, citizens would have a clear picture of the accumulation of their own pension savings throughout their working life. Second, they would pay hardly any extra costs and, third, once retired they would not be subject to the whims of government or other pension fund managers. This paper investigates the feasibility of individual pension building under various parameter settings by calculating the pension saved during a working life and the pension dis-saved after retirement. The findings show that there are no reasons why the European Union and individual member states should not allow individual risk-free pension savings accounts. This would have macroeconomic benefits and provide a solid pension provision that can enhance mobility, instead of engaging workers in different mandatory collective pension schemes that exist around in the European Union.

 


Collective pension savings funds were once created with the aim to care for each other. However, times have changed. The demographic change that is putting pressure on public finances asks for greater flexibility at the EU labour market. In order to stimulate labour mobility, we suggest giving each working person in the EU the option to have an individual risk-free pension saving scheme (in Dutch: een zilvervloot voor de werkende Europeaan). 



Fiscal pressure from demographic changes is mounting across the globe. Cross-country comparisons suggest that, until at least 2050, the countries most under pressure will be Poland, Turkey, and Greece.

 

 


 

MRM 2012





Posted on this site on 7 July 2011 - published in Journal of Global Economics, 2012, Vol 8(2)

Demographic change across the globe puts pressure on labour markets and public finances. Most studies on ageing focus on the projected development of the old age dependency ratio, being the ratio of persons 65 or older relative to the working age population. This ratio gives a very incomplete picture of the (fiscal) pressure from demographic changes. In this study, besides the share of the dependent population composed of the young and the old, we also include the share of the working age population that is not active on the labour market, labelled as the labour market space. By analysing 21 developing and 29 developed economies across the globe, we cover 75% of the 9.3 billion people that the United Nations projects for the whole world in 2050. A new indicator, relating demographic pressure from fiscal spending to the available space at the labour market, enables us to quantify and compare the pressure-to-space across countries over the time span 2010-2050. The indicator points out that Poland, Turkey and Greece are most under pressure. Developing countries, such as Uganda, the Democratic Republic of Congo and Tanzania will experience a very low pressure up to 2050 in case their fiscal spending per young and elderly person remains at the current levels. In most of the countries under high pressure there seems to be room for using the labour market space by, for instance, working more hours or increasing the retirement age, as this will alleviate the fiscal pressure. This suggests a policy trade-off between maintaining publicly financed services to the dependent population and maintaining labour market space.
 

Presented at the 8th ECB/CEPR/IfW Labour Market Workshop Wages in a time of adjustment and restructuring in Frankfurt on 13-14 December 2011

Posted on this site on 1 July 2011  

This paper discusses the endeavours of policy makers to come to some degree of wage coordination among EU countries, aiming at aligning wage growth with labour productivity growth at the national levels. In this context, we analyse the wage and productivity developments in Germany, the European Union’s periphery countries Greece, Ireland, Portugal, and Spain along with the US for the period 1980-2010. Apart from the contribution of productivity to wages, we take into account the contributions of prices, unemployment, replacement rates and taxes by means of an econometrically estimated non-linear wage equation resulting from a wage bargaining model. We further study the downward rigidities of wages in depth. The findings show that in past times of low productivity, price inflation and reductions in unemployment put significant upward pressure on wage growth, also in the low inflationary period of the 2000s. Greece, Ireland, Portugal and Spain are far from aligning wage growth with productivity growth. German productivity is a major German wage determinant, but surely not the only one. To steer wages, policy makers can effectively use the replacement rate.




Posted on this site on 2 June 2011

After the drama of Egypt’s revolution comes the economic reality – one of the catalysts for regime change was the country’s high unemployment. This column shows that the growing number of young people entering the job market will only add to the pressure. It argues that job creation in the private sector should be the number one priority for stimulating Egypt’s economic growth.





 
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