Micro-Based Evidence of EU Competitiveness: The CompNet Database
Filippo di Mauro, et al.
ECB Working Paper,
No. 1634,
2014
Abstract
Drawing from confidential firm-level balance sheets in 11 European countries, the paper presents a novel sectoral database of comparable productivity indicators built by members of the Competitiveness Research Network (CompNet) using a newly developed research infrastructure. Beyond aggregate information available from industry statistics of Eurostat or EU KLEMS, the paper provides information on the distribution of firms across several dimensions related to competitiveness, e.g. productivity and size. The database comprises so far 11 countries, with information for 58 sectors over the period 1995-2011. The paper documents the development of the new research infrastructure, describes the database, and shows some preliminary results. Among them, it shows that there is large heterogeneity in terms of firm productivity or size within narrowly defined industries in all countries. Productivity, and above all, size distribution are very skewed across countries, with a thick left-tail of low productive firms. Moreover, firms at both ends of the distribution show very different dynamics in terms of productivity and unit labour costs. Within-sector heterogeneity and productivity dispersion are positively correlated to aggregate productivity given the possibility of reallocating resources from less to more productive firms. To this extent, we show how allocative efficiency varies across countries, and more interestingly, over different periods of time. Finally, we apply the new database to illustrate the importance of productivity dispersion to explain aggregate trade results.
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Efficiency in the UK Commercial Property Market: A Long-run Perspective
Steven Devaney, Oliver Holtemöller, R. Schulz
IWH Discussion Papers,
No. 15,
2012
Abstract
Informationally efficient prices are a necessary requirement for optimal resource allocation in the real estate market. Prices are informationally efficient if they reflect buildings’ benefit to marginal buyers, thereby taking account of all available information on future market development. Prices that do not reflect available information may lead to over- or undersupply if developers react to these inefficient prices. In this study, we examine the efficiency of the UK commercial property market and the interaction between prices, construction costs, and new supply. We collated a unique data set covering the years 1920 onwards, which we employ in our study. First, we assess if real estate prices were in accordance with present values, thereby testing for informational efficiency. By comparing prices and estimated present values, we can measure informational inefficiency. Second, we assess if developers reacted correctly to price signals. Development (or the lack thereof) should be triggered by deviations between present values and cost; if prices do not reflect present values, then they should have no impact on development decisions.
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Foreign Bank Entry, Credit Allocation and Lending Rates in Emerging Markets: Empirical Evidence from Poland
Hans Degryse, Olena Havrylchyk, Emilia Jurzyk, Sylwester Kozak
Journal of Banking and Finance,
No. 11,
2012
Abstract
Earlier studies have documented that foreign banks charge lower lending rates and interest spreads than domestic banks. We hypothesize that this may stem from the superior efficiency of foreign entrants that they decide to pass onto borrowers (“performance hypothesis”), but could also reflect a different loan allocation with respect to borrower transparency, loan maturity and currency (“portfolio composition hypothesis”). We are able to differentiate between the above hypotheses thanks to a novel dataset containing detailed bank-specific information for the Polish banking industry. Our findings demonstrate that banks differ significantly in terms of portfolio composition and we attest to the “portfolio composition hypothesis” by showing that, having controlled for portfolio composition, there are no differences in lending rates between banks.
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Federal grants for local development to stop economic decline? – Lessons from Germany
Peter Haug, Martin T. W. Rosenfeld
Consequences of the International Crisis for European SMEs – Vulnerability and resilience. Routledge Studies in the European Economy, Routledge,
2012
Abstract
The chapter analyses theoretically and empirically the supply-side effects of the public investments funded by the German „Economic Stimulus Package II“(Konjunkturpaket II), which was implemented in 2009. In the theoretical part, we address the distortionary effects of investment grants on public capital provision and local economic development. According to the theoretical literature on the efficient provision of public goods, public inputs and economic growth, conditional investment grants have several negative allocation effects: First, they distort the relative factor prices for the local government stimulating excess public capital stocks and Pareto-inefficient provision of public goods. Second, long-term growth-enhancing effects of debt-financed public investment could only be expected for public inputs, which either directly increase the productivity of the private sector or increase factor productivity, especially by increasing the stock of human capital. In the empirical part, we find that despite of the recent increase in municipal investments in the German state of Saxony our regression results do not confirm a connection with the ESPII funds. Furthermore, no relationship between the municipal fiscal strength and the amount of ESPII grants received could be found. All in all, due to the focus of the grants on public consumption goods rather than public inputs only marginal future growth effects can be expected from the subsidized investments.
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Bank Lending, Bank Capital Regulation and Efficiency of Corporate Foreign Investment
Diemo Dietrich, Achim Hauck
IWH Discussion Papers,
No. 4,
2007
Abstract
In this paper we study interdependencies between corporate foreign investment and the capital structure of banks. By committing to invest predominantly at home, firms can reduce the credit default risk of their lending banks. Therefore, banks can refinance loans to a larger extent through deposits thereby reducing firms’ effective financing costs. Firms thus have an incentive to allocate resources inefficiently as they then save on financing costs. We argue that imposing minimum capital adequacy for banks can eliminate this incentive by putting a lower bound on financing costs. However, the Basel II framework is shown to miss this potential.
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How do multinationals meet investment decisions: The case study of General Motors
Diemo Dietrich, Daniel Höwer
Wirtschaft im Wandel,
No. 10,
2005
Abstract
The recent events around Opel, the German subsidiary of General Motors, has attracted a great deal of attention, especially with respect to the influence of multinational corporations on the German economy. General Motors' announcement of an internal competition for production capacities in June 2004 has led some observers to the assessment that this would be a step towards more efficiency and profitability. But such internal competition for ressources may be hampered and end up in inefficiency. This is because informational frictions and enforcement problems within a corporation restrict the headquarters ability and willingness to allocate ressources efficiently. Against this background, we discuss possible problems associated with the internal capital allocation within multinational corporations and show their relevance in the case of General Motors.
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Non-market Allocation in Transport: A Reassessment of its Justification and the Challenge of Institutional Transition
Ulrich Blum
50 Years of Transport Research: Experiences Gained and Major Challenges Ahead,
2005
Abstract
Economic theory knows two systems of coordination: through public choice or through the market principle. If the market is chosen, then it may either be regulated, or it may be fully competitive (or be in between these two extremes). This paper first inquires into the reasons for regulation, it analyses the reasons for the important role of government in the transportation sector, especially in the procurement of infrastructure. Historical reasons are seen as important reasons for bureaucratic objections to deregulation. Fundamental economic concepts are forwarded that suggest market failure and justify a regulatory environment. The reasons for regulation cited above, however, may be challenged; we forward theoretical concepts from industrial organization theory and from institutional economics which suggest that competition is even possible on the level of infrastructure. The transition from a strongly regulated to a competitive environment poses problems that have given lieu to numerous failures in privatization and deregulation. Structural inertia plays an important role, and the incentive-compatible management of infrastructure is seen as the key element of any liberal transportation policy. It requires that the setting of rules on the meta level satisfies both local and global efficiency ends. We conclude that, in market economies, competition and regulation should not be substitutes but complements. General rules, an "ethic of competition" have to be set that guarantee a level playing field to agents; it is complimented by institutions that provide arbitration in case of misconduct.
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