Real Options of Private House Owners in the East German Housing Market – How Demolition Subsidies Affect Investment Prospects for Private House Owners
Dominik Weiß
Wirtschaft im Wandel,
No. 6,
2008
Abstract
The subsidies of the German urban renewal program “Stadtumbau Ost” are claimed mainly by communal and cooperative housing companies. The instruments do not fit very well for private proprietors that hold a great part of the older housing stock in central locations, for example in Wilhelminian style districts. Interim evaluation reports concerning the implementation of the “Stadtumbau” program show good results for big housing blocks, but constantly high vacancy rates in the inner city quarters. It becomes obvious that the political targets have not been achieved completely so far and that market forces limit the extensive restoration of historic buildings.
The opportunities, economic incentives and the decisions of landlords and house owners will be analyzed with a real option approach. A detailed view considers the different available forms of subsidies, examining its power to affect real estate values and to initiate politically desired urban transformations. It can be shown that the current forms of subsidies fail to promote investment of private house owners because of rising value expectations. Downgrading the building zones to lower density might reduce unrealistic expectations that were identified as a hurdle to invest. As a consequence from this consideration, municipalities should implement alternative urban development concepts and adjust the subsidy policy.
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Russia: Ongoing Strong Economic Growth Overshadowed by High Inflation
Martina Kämpfe
Wirtschaft im Wandel,
No. 6,
2008
Abstract
Russian economic growth in 2007 again was driven by strong private consumption and investment, grew by double-digit rates. The roles of budget expenditures and borrowing of private and state-owned firms from abroad in financing investments increased rapidly. Russian inflation climbed again; it was driven up by increases in food prices in line with rising food prices around the world. Inflation pressures had sharpened through more budget spending and scheduled rate increases for electricity and gas as well as for regulated prices for municipal services. Broad money supply (M2) rose rapidly because of strong foreign currency inflows, too. Central bank seeks to bring inflation under control by tightening monetary policy this year. That will somewhat dampen economic growth, but nevertheless GDP growth in the near future will remain at high levels.
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Foreign Subsidiaries in the East German Innovation System – Evidence from Manufacturing Industries
Jutta Günther, Björn Jindra, Johannes Stephan
IWH Discussion Papers,
No. 4,
2008
Abstract
This paper analyses the extent of technological capability of foreign subsidiaries located in East Germany, and looks at the determinants of foreign subsidiaries’ technological sourcing behaviour. The theory of international production underlines the importance of strategic and regional level variables. However, existing empirical approaches omit by and large regional level factors. We employ survey evidence from the “FDI micro data- base” of the IWH, that was only recently made available, to conduct our analyses. We find that foreign subsidiaries are above average technologically active in comparison to the whole East German manufacturing. This can be partially explained by the industrial structure of foreign direct investment. However, only a limited share of foreign subsidiaries with R&D and/or innovation activity source technological knowledge from the East German innovation system. If a subsidiary follows a competence augmenting strategy or does local trade, it is more likely to source technological knowledge locally. The endowment of a region with human capital and a scientific infrastructure has a positive effect too. The findings suggest that foreign subsidiaries in East Germany are only partially linked with the regional innovation system. Policy implications are discussed.
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Export Promotion Needs the Disclosure of Industrial Potentials – A Case Study for the Federal State of Thuringia
Udo Ludwig, Brigitte Loose, Cornelia Lang
Wirtschaft im Wandel,
No. 5,
2008
Abstract
In countries and regions with weak domestic markets, the orientation towards external markets plays an important rule. This applies even more for economies emerging from the transformation process from a state to a market economy with a small export sector and a continuous decline in the number of residents. The federal state Thuringia presents such an example. There is still a large gap in exports compared to Germany as a whole. The paper deals with the role of exports in economic development and economic measures to increase the export activities of small and medium-sized companies (SMEs) in Thuringia. The study is based on a survey among SMEs in Thuringia on the performance of exporters and non-exporters. One of the main findings shows that export promotion was important only for one among three exporting companies during the last three years. That speaks for the confidence of the firms in their own power. The most measures used to implement or advance export activities are participation in a fair, information sessions on foreign markets and two general instruments to support companies: investment and innovation stimulation. As a result, economic measures make sense, but it should not depend on the age or the size of a company. Besides, the support should not only be given by department of foreign trade, but also by other departments. Finally, especially newcomers should be supported to entry foreign markets.
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International Financial Integration and Stability: On the Causes of the International Banking Crisis 2007/08 and Some Preliminary Lessons.
Diemo Dietrich, Achim Hauck
Wirtschaft im Wandel,
No. 5,
2008
Abstract
Since its beginning, the recent financial market turmoil that has come to be known as the „subprime crisis“ has provoked considerable controversy among both, policymakers and scientists. The debate mainly focuses on two questions. The first is whether and how short-term measures should be taken to stabilize the global financial system. The second is which general lessons can be drawn from this crisis. Up to now, several potential causes of the crisis have been discussed in a more or less isolated manner. However, a predominant source of the crisis has not been identified yet. Accordingly, there is still a lack of knowledge regarding general consequences of the crisis for economic policy.
The purpose of this article is twofold. First, we show that to a large extent the crisis is due to the economic integration of formerly peripheral countries into the world economy that led to significant savings and investment imbalances. Thus, we argue that the crisis not only is a global phenomenon in its effects but also has global roots. Based on this argument, the second purpose of our paper is to derive implications for economic policy, where we also discuss the consequences for the future design of the global financial architecture.
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Economic Upswing and Vitalization of the Labor Market – Who Gains From the Upswing?
Herbert S. Buscher
Wirtschaft im Wandel,
No. 5,
2008
Abstract
The current situation with respect to the economic development in Germany may be characterized as somewhat suppressed as opposed to euphoric. And this statement holds although the German economy is in an upswing phase since 2005, and the GDP growth rates clearly exceed 2% per annum. The main driving forces of this upswing are mainly from the German exports as well as the domestic investment decisions. Rather underdeveloped compared with the exports and the investment is private consumption. This development is accompanied by positive signals from the German labor market. Declining unemployment figures, increasing regular employment and a smaller number of people in active labor market policy measures are the accompanying positive signals from the labor market. But this in general positive development has not yet reached widespread groups of employees in the sense that their real income has also risen and they thus can dispose of a higher amount of purchasing power. This time lag in the different developments between employment and income may lead to a situation that perceived and actual developments may differ and that actually, there might be a gap between the two. The paper discusses what could be meant with „perceived” development and reaches to the conclusion that actual and perceived developments are not so far away from each other than one might have expected.
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Consequences of the US-subprime Crisis Dampen Economic Growth in Germany
Wirtschaft im Wandel,
1. Sonderausgabe
2008
Abstract
The crises of the housing and the financial sector in the US and the turmoil on worldwide financial markets have clouded the prospects of the world economy for this and next year. In particular, conditions for financing consumption and investment will worsen. In addition, the price hikes for energy and food entail a redistribution of purchasing power from ordinary households to the producers of these goods. As a consequence of all this, the economy in the US will be more or less stagnating this year, and world growth will slow down. Firms in the nonfinancial sector, however, are generally in good financial condition, policy in the US takes strong measures to contain the crisis, and growth dynamics in emerging markets economies appear to be robust enough to withstand the dampening effects. In Germany, the economy is, in spite of the adverse effects from abroad and in particular the strong appreciation of the euro, still in good shape. Apparently, the economy has become more robust in the past years, partly due to increased competitiveness of German producers. Still, economic expansion will slow down, with annual growth rates of 1.8% for this year and 1.4% for 2009.
For the first time the forecast of the institutes comprises a medium term projection. For this, the potential growth rate of the German Economy is estimated to be 1.6%. As to policy recommendations, the institutes advise against the establishment of minimum wages in Germany, because they fear adverse effects for employment. In this point the IWH and its partners take a different view.
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Oil Prices and International Trade: How Petrodollar Recycling Affects the Industrialised Countries
Götz Zeddies
Wirtschaft im Wandel,
No. 4,
2008
Abstract
Since 2004, prices for crude oil nearly tripled at international commodity markets. In the wake of the oil crises of the 1970s and ‘80s, numerous empirical studies analysing the macroeconomic effects of sharp increases in commodity prices were carried out pointing at the risks of oil price rises for GDP growth in oil-importing countries. However, in most of these analyses, the impact of oil price increases on international trade of oil-importing countries, which gained in importance in the course of globalisation, is considered only marginally. This is especially the case for the additional revenues of oil-exporting countries spent in large parts for imports from and investment in the industrialised economies.
The present article examines the impact of oil price increases on merchandise exports and imports of single oil-importing industrialised countries. The results show that the curbing effects on merchandise exports are lower than on imports. Whereas import demand responds disproportionally high on the decline in consumption and investment in consequence of oil price increases, the effects on merchandise exports are ambivalent. On the one hand, exports to oil-importing trading partner countries decline due to the local economic downturns, but on the other, exports to oil-exporting countries sharply increase. As a consequence, the negative impact of rising oil prices on macroeconomic activity in oil-importing countries is lowered by the external sector due to growing net exports.
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German Economic Growth in 2008: Temporary Slow Down
Wirtschaft im Wandel,
No. 4,
2008
Abstract
World economic growth has slowed in the first months of 2008. The main causes are the crisis in the US housing sector and the turmoil in the financial sector in general, the spreading expectation of a recession in the US, and sharply rising prices for energy and food. The German economy, though, is still expanding healthily, with strong investment and export activities. Private consumption, however, shrank at the end of 2007. In 2008, while favorable labor market conditions will improve job security and thus the propensity to consume, real incomes will not rise by much due to the risen inflation rate; consumption will again expand only modestly this year. A slower expansion of the world economy and the stronger euro will dampen exports and investment. All in all, growth will slow to (working-day adjusted) 1.2% in 2008. Chances are good that in the next year, after the negative shocks have faded out a bit, growth will be accelerating again. The East German Economy was on a lower growth path in 2006 and 2007 than the economy in the West, according to recently revised national accounts data. Industrial production, however, is more dynamic in the East. Unemployment rates will continue to decrease faster in the East: as in the rest of Germany, employment is growing, and, contrary to what happens in the West, the labor force is shrinking.
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The European Emissions Trading System: What Have We Learned so Far?
Wilfried Ehrenfeld
Wirtschaft im Wandel,
No. 3,
2008
Abstract
The IWH occupies with the consequences of the emission trading for the effected companies. The first period of the European Emission Trading System was conceived as a learning phase during which two problems occurred: The first and most obvious one was the surplus of certificates. The incentives to invest in the mitigation of CO2 can therefore be considered to be low. The second problem resulted from the allocation which was entirely for free. While electricity customers had to bear the main financial burden, electricity producers profited as the certificate-prices were obviously added to the electricity-prices as opportunity costs. The analysis comes to the conclusion that it was right to shorten the amount of certificates on the EU-level for the second trade period and to establish the partly sales or auctioning of certificates in German legislation. Furthermore, the simplification of the allocation method in Germany can be considered to be a progress.
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