Does temporary employment influence the workrelated training of low-skilled employees?
Eva Reinowski, Jan Sauermann
IWH Discussion Papers,
No. 2,
2008
Abstract
Fixed-term contracts are considerd as one of the most popular instruments of labour market flexibility. Although they provide new labour market options for employer and employees, it is argued that they may lead to decreasing investments in human capital. From the theoretical point of view it is not clear wheter a fixed-term contract is a drawback for the participation in work-related training. The paper deals with the influence of fixed-term contracts on work-related training especially for low-skilled workers. Based on the Micro Census data of 2004, we estimate a bivariate probit model for the probability of fixed-term employment and participating in work-related training. This model enables us to control for selection effects that may arise from unobservable factors. From the estimation results we can conclude that holding a fixed-term contract does not mean a systematical disadvantage for the training probability of low-skilled employees.
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The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West
Wolfgang Steffen, Johannes Stephan
IWH Discussion Papers,
No. 11,
2007
Abstract
This paper assess determinants of productivity gaps between firms in the European transition countries and regions and firms in West Germany. The analysis is conducted at the firm level by use of a unique database constructed by field work. The determinants tested in a simple econometric regression model are focussed upon the issue of human capital and modern market-oriented management. The results are novel in as much as a solution was established for the puzzling results in related research with respect to a comparison of formal qualification between East and West. Furthermore, the analysis was able to establish that the kind of human capital and expertise mostly needed in the post-socialist firms are related to the particular requirements of a competitive marketbased economic environment. Finally, the analysis also finds empirical support for the role of capital deepening in productivity catch-up, as well as the case that the gaps in labour productivity are most importantly rooted in a more labour-intense production, which does not give rise to a competitive disadvantage.
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Banking Regulation: Minimum Capital Requirements of Basel II Intensify Transmission from Currency Crises to Banking Crises
Tobias Knedlik, Johannes Ströbel
Wirtschaft im Wandel,
No. 8,
2007
Abstract
Emerging market currency crises are often followed by banking crises. One reason for the transmission is the increased value of foreign debt measured in local currency. Equity capital is often insufficient to ensure liquidity. This problem is addressed by Basel II, in particular by its minimum capital requirements. In difference to the current regulation (Basel I), Basel II employs a differentiated risk weighing on base of credit ratings. This contribution calculates the hypothetic effects of the new regulation on minimum capital requirements for the example of the South Korea currency and banking crises of 1997. The results are compared to current regulation. It can be shown that minimum capital requirements in the case of Basel II would have been lower than in the case of Basel I. Additionally, minimum capital requirements would have increased dramatically. The transmission from currency to banking crises would not have been prevented, but would have been accelerated. Thereby, minimum capital requirements under Basel I have been relatively low because of South Korea’s OECD membership. It can therefore be concluded that in other emerging market economies, which are not OECD members, the ratio of minimum capital requirements of Basel II to the minimum capital requirements of Basel I prior the crises would have been even lower. Therefore, the new instrument of banking regulation would have intensified the transmission from currency to banking crises.
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East German Economy: Demand Push Stronger than Structural Deficiencies
Wirtschaft im Wandel,
No. 7,
2007
Abstract
In 2006, growth of production was surprisingly strong in Eastern Germany. The structural deficiencies there would have suggested a slower pace. In particular, linkages with national and international business cycles have been underestimated. To a large part, the reason why output grew by 3 per cent did not come from Eastern Germany itself, but from the Old Länder and from abroad. In the New Länder, the strong upward swing in investment activity stimulated the economy. However, owing to a small increase in total income of private households, their purchasing power lagged behind.
The improved ability of East German firms to absorb cyclical impulses from exports and from Germany’s general investment activity proved to be a crucial factor. In particular, the endowment of workplaces with modern production facilities as well as the continued reduction in the disadvantages with respect to cost-competitiveness in the tradable goods sector were beneficial. The labour cost advantage compared to West German competitors increased further while the disadvantage compared to those from Central and Eastern Europe decreased.
Benefiting from these factors, economic activity in Eastern Germany will grow faster than in the Old Länder as long as the upswing in Germany and abroad remains strong. In 2007 and 2008, investments – especially in equipment – and exports will be the driving forces again. For exports, the strongly expanding markets in Central and Eastern Europe as well as in Russia will gain in importance. As income and employment prospects improve, private consumption will support the growth in production. Registered unemployment should decrease below the 1-million threshold.
Manufacturing will remain the primary force of the upswing; its advantages in production costs will not vanish as long as, even in presence of scarcity of skilled labour, salaries and wages do not increase more than in Western Germany. In the wake of robust economic growth, the New Länder will make further progress in catching up with respect to production and income.
Companies will regain support from the banking industry. Yet, investment capital still stems from public funding programmes to a non-negligible extent. In the medium run, access to credit will ease as a result of further improvements in the firms’ net worth position. However, dependency on internal funds remains high and exposes companies to comparatively strong cyclical risks. In an economic downturn, the structural deficiencies of the East German economy will impair economic expansion.
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Systematic Mispricing in European Equity Prices?
Marian Berneburg
IWH Discussion Papers,
No. 6,
2007
Abstract
One empirical argument that has been around for some time and that clearly contra- dicts equity market efficiency is that market prices seem too volatile to be optimal estimates of the present value of future discounted cash flows. Based on this, it is deduced that systematic pricing errors occur in equity markets which hence can not be efficient in the Effcient Market Hypothesis sense. The paper tries to show that this so-called excess volatility is to a large extend the result of the underlying assumptions, which are being employed to estimate the present value of cash flows. Using monthly data for three investment style indices from an integrated European Equity market, all usual assumptions are dropped. This is achieved by employing the Gordon Growth Model and using an estimation process for the dividend growth rate that was suggested by Barsky and De Long. In extension to Barsky and De Long, the discount rate is not assumed at some arbitrary level, but it is estimated from the data. In this manner, the empirical results do not rely on the prerequisites of sta- tionary dividends, constant dividend growth rates as well as non-variable discount rates. It is shown that indeed volatility declines considerably, but is not eliminated. Furthermore, it can be seen that the resulting discount factors for the three in- vestment style indices can not be considered equal, which, on a risk-adjusted basis, indicates performance differences in the investment strategies and hence stands in contradiction to an efficient market. Finally, the estimated discount rates under- went a plausibility check, by comparing their general movement to a market based interest rate. Besides the most recent data, the estimated discount rates match the movements of market interest rates fairly well.
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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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Schwierigkeiten der Investitionsförderung – Der Fall CargoLifter AG
Mirko Titze
Wirtschaft im Wandel,
No. 12,
2006
Abstract
This paper shows how the state of Brandenburg has subsidized large investments. The Focus of this papers is the case of the CargoLifter AG. The government intended to prevent in the mid 90's the total break-down of the economy in the state of Brandenburg, which is particularly affected by structural changes. This kind of policy is highly controversial casing lengthy discussions. After raising approximately 220 millions of Euro in the capital market and receiving nearly 50 million Euros from the state of Brandenburg the CargoLifter AG run into financial difficulties. The Government subsidized the CargoLifter AG as part of the “Gemeinschaftsaufgabe zur Verbesserung der regionalen Wirtschaftsstruktur - (GA)“. There were arguments to subsidize the CargoLifter AG. This paper analyzes the project management of the company as well as the subsidization with the “Gemeinschaftsaufgabe zur Verbesserung der regionalen Wirtschaftsstruktur - (GA)“of the state of Brandenburg in terms of their contribution to the insolvency of the CargoLifter AG.
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The role of banking portfolios in the transmission from the currency crises to banking crises - potential effects of Basel II
Tobias Knedlik, Johannes Ströbel
IWH Discussion Papers,
No. 21,
2006
Abstract
This paper evaluates the potential effects of the Basel II accord on preventing the transmission from currency crises to financial crises. By analyzing the case study of South Korea, it shows how mismatches on banks’ balance sheets were the primary cause for such a transmission, and models how Basel II would have affected those balance sheets. The paper shows that due to South Korea’s positive credit rating in the months leading up to the crisis, the regulatory capital reserves under Basel II would have been even lower than those under Basel I, and that therefore Basel II would have had adverse effects on the development of the crisis. In the second part, the article analyses whether the behavior of rating agencies has changed since their failure to predict the Asian crisis. The paper finds no robust econometric evidence that rating agencies have started to take micromismatches into account when assigning sovereign ratings. Thus, given the current approach of credit rating agencies, we have reservations concerning the effectiveness of Basel II to prevent the transmission from currency crises to banking crises, both for the case of South Korea and for potential future crises.
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Too old to work? The impact of age on productivity
Lutz Schneider
Wirtschaft im Wandel,
No. 11,
2006
Abstract
Due to the public debate on the raising legal re-tirement age in Germany labor market research has recently focused on an explanation of the low labor market participation rate of elders. In the economic discussion the low participation is pri-marily explained by a supposed imbalance of la-bor costs and returns for old workers. Whereas wages rise with increasing age, the individual productivity seems to fall beyond a certain age. Gerontological research supports this view, since it documents an age-driven decline of physical and certain mental abilities. The study empirically evaluates the thesis of a diminishing individual productivity at higher ages. The analysis is done on the basis of a new dataset for German firms of the manufacturing sector. Using these data the effect of the employee’s age on a firm’s productiv-ity is estimated and conclusions on the job per-formance of workers at different ages are drawn. The performed cross-section-regressions of the years 2003 and 2000 indicate an inverted u-shaped age-productivity-profile. The 25-44 year olds turn out to be the most productive, the share of the over 44 year old workers seems to dampen productivity. However the 15-24 age group makes the lowest productivity contribution. Moreover a positive effect of firm-related experience can be found. Due to elders’ higher stock of firm specific human capital this might at least partly compen-sate the unfavorable effects of aging.
From a political perspective these findings sup-port the view, that an increasing legal retirement age will not automatically lead to a remarkable extension of the labor demand for older people. In addition to legal aspects the wage schemes and the actual productivity profiles in higher age have to be linked more closely together.
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Where enterprises lead, people follow? Links between migration and FDI in Germany
Claudia M. Buch, J. Kleinert, Farid Toubal
European Economic Review,
No. 8,
2006
Abstract
Standard neoclassical models of economic integration are based on the assumptions that capital and labor are substitutes and that the geography of factor market integration does not matter. Yet, these two assumptions are violated if agglomeration forces among factors from specific source countries are at work. Agglomeration implies that factors behave as complements and that the country of origin matters. This paper analyzes agglomeration between capital and labor empirically. We use state-level German data to answer the question whether and how migration and foreign direct investment (FDI) are linked. Stocks of inward FDI and of immigrants have similar determinants, and the geography of factor market integration matters. There are higher stocks of inward FDI in German states hosting a large foreign population from the same country of origin. This agglomeration effect is confined to higher-income source countries.
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