The Maximum Level of Fines Restricts the Effect of European Competition Law
Henry Dannenberg, Nicole Steinat
Wirtschaft im Wandel,
No. 2,
2008
Abstract
In 2006, the fining guidelines for competition law infringements were completely renewed. The aim of this reform was twofold: on the one hand to decrease the incentive for cartelization and on the other hand to increase the likelihood of cartel detection.
The article studies how company’s decision for or against a cartel is influenced by these guidelines. We show that due to the maximum level of fines – which refers to the worldwide group turnover - an effective deterrence level can be achieved only for those companies, which realize just a small part of their turnover in the relevant market. Their incentive to blow the whistle increases with the cartel duration. This leads to a rising instability of cartels where one member generates only a small part of its turnover in the relevant market. In contrast, the deterrence level for companies that realize a large part of their sales in the relevant market is quite low due to the maximum level of fines.
The article gives a short overview of the risk factor competition law – from a company perspective. We illustrate how the expenditures related to cartel law infringements can be calculated. Further on, the minimum profit margins that are necessary for an economically advantageous cartel are determined. We show that for certain types of cartels already small rates of return are sufficient to make cartel participation attractive.
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Culture as a Base for Efficient Economic Systems
Ulrich Blum
Wirtschaft im Wandel,
No. 2,
2008
Abstract
Globalization puts the German economic model, the so-called social market economy, under pressure. Constituting elements of this model are fundamental social and economic values. Globalization puts some of these values under pressure and creates inefficiencies because the costs of running the social and economic fabric rise. This is an important justification to inquire into the normative foundations of economic efficiency The following article discusses to what extent culture is a base for efficient economic systems. Information theory is regarded as a key element for explaining social change. The arguments are based on institutional economics with a special view on transaction costs and on cooperation structures. It is shown that specific information technologies promote forms of cooperation, which influence institutional arrangements. The related information technologies themselves are part of the cultural system and its value structures. As a consequence, competition among economic systems favours certain combinations of technologies, cultural arrangements and economic systems. In as much as cultural competition precedes economic competition in the sense of a certain way of thinking, the cultural system can be regarded as a strategic competitive parameter for an economy.
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On the Economics of Ex-Post Transfers in a Federal State: A Mechanism Design Approach
Martin Altemeyer-Bartscher, T. Kuhn
WWDP, 95,
No. 95,
2008
Abstract
As a common feature in many federal states grants-in aid are payed to jurisdictions ex post, i.e. after local policy measures have chosen. We show that the central government cannot offer grants ex ante in a federal states with informational asymmetries as well as inter-temporal commitment problems. Local governments’ incentives to provide public goods are distorted if they rely on federal grants-in-aid offered ex post. Furthermore it becomes obvious that local governments are apt to substitute tax revenue for higher grants-in-aid if relevant local data are unobservable for the central government. To which extend ex post transfers mitigate local governments’ incentives crucially depends on the information structure predominant in the federation.
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Risk-factor competition law infringement
Henry Dannenberg, Nicole Steinat
Risk, Fraud & Compliance ZRFC,
No. 1,
2008
Abstract
During the last couple of years the European Commission increased the fines for competition law infringements. Regardless whether an infringement was only negligent or intended it can result in enormous financial risks for companies. The following article shows a distribution of the financial risk of cartel law infringements in Europe. The potential fine - which can amount to a multiple of annual sales in the relevant market - should sensitize managers to check their own undertaking whether they are involved in such violations.
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Aktuelle Trends: Gute Gründe für ausländische Direktinvestitionen in Ostdeutschland
Jutta Günther, Björn Jindra, Johannes Stephan
Wirtschaft im Wandel,
No. 1,
2008
Abstract
Das IWH hat eine aktuelle Befragung ausländischer Investoren im Verarbeitenden Gewerbe in den Neuen Bundesländern (einschließlich Berlin) durchgeführt. Die antwortenden Unternehmen gaben dabei auch die relative Bedeutung verschiedener Investitionsmotive der jeweiligen ausländischen Eigentümer zum Zeitpunkt der Neugründung eines Tochterunternehmens bzw. der Beteiligung an einem bereits existierenden Unternehmen an.
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Business cycle forecast 2008: German upswing takes a break
Wirtschaft im Wandel,
No. 1,
2008
Abstract
Economic growth in the industrial countries will be much more muted in 2008 than in the past year. One cause is the prolonged oil price hike during 2007. The second and more important cause is the intensification of tensions on world financial markets. Due to problems in the financial sector, credit expansion will slow next year in the euro area as well as in the US. This will dampen demand in the real economy. A significant downswing in the industrial countries, however, is not the most likely scenario: in the US, expansive economic policy and a weak dollar that gives production in the US a competitive edge will prevent the economy from sliding into recession. In the euro area, high profitability of firms and structural improvements in the working of labour markets will help the economy cope with the stronger euro and with higher costs of external financing due to the turmoil in the financial sector. In Germany, the upswing has still not reached the demand of private households. The main reason is that real wages were stagnating in 2007 and will not rise by much in 2008, since inflation has accelerated considerably at the end of last year. In addition, weaker dynamics of external demand will dampen export growth. This and the end of tax incentives for investment at the end of 2007 will dampen investment activity. All in all, the economy will slow down in the first half of 2008. However, chances are good that the upswing will only have taken a break: when the dampening external shocks have ceased, the driving powers of the upswing will prevail; dynamic employment growth is a reflection of the strong confidence of firms. A major risk for employment and for the German economy in general is, however, the possibility that the policy concerning the labour markets changes course; bad omens are the recent the introduction of minimum wages for postal services and the announced extension of unemployment benefits for persons older than 50.
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Grenzen des Wettbewerbs im Gesundheitswesen
Ingmar Kumpmann
IWH Discussion Papers,
No. 1,
2008
Abstract
Many health economists demand more competition in the health care system. They focus on the competition between sickness funds for insured and the competition between health care providers for contracts with sickness funds. But they neglect the competition between health care providers for patients which is crucial for medical quality. This third field of competition is in conflict with the two former fields. The empirical evidence concerning the effects of competition on cost and quality is also ambiguous. Thus the mere claim for “more competition” does not do justice to the high complexity of the health care system.
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Globalisierung und Beschäftigung – eine Untersuchung mit der Input-Output-Methode.
Udo Ludwig, Hans-Ulrich Brautzsch
IMK Studies Nr. 1/2008,
No. 1,
2008
Abstract
In the course of globalization imports play a more and more important role as inputs for national production. In the wake of this development, domestic products are substituted by imported goods and jobs are moved abroad. However, this enables domestic companies to become more competitive and to improve their position in national and international markets. Applying input-output techniques this paper shows that, although imports have risen considerably, the increase in domestic production induced by exports had an overall positive impact on the German economy. This holds not only for the trade balance of production sectors that are oriented to export activities, but for the trade balance as a whole. Overall, high export surpluses were accompanied by increases in value added. Furthermore, especially in the second half of the last decade employment benefited much; while the rising import of intermediate and finished goods has caused many job cuts, on balance the increase in employment in the wake of the strong export expansion has outdone the losses.
Even though many industrialized economies in Europe have made similar experiences, the impacts on job markets differed considerably. For example, while the strength of the increase in employment in the Netherlands was similarly to that in Germany, labour market improvements in France were much weaker, not least due to noticeably lower export surpluses.
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Deeper, Wider and More Competitive? Monetary Integration, Eastern Enlargement and Competitiveness in the European Union
Gianmarco Ottaviano, Daria Taglioni, Filippo di Mauro
ECB Working Paper,
No. 847,
2008
Abstract
What determines a country’s ability to compete in international markets? What fosters the global competitiveness of its firms? And in the European context, have key elements of the EU strategy such as EMU and enlargement helped or hindered domestic firms’ competitiveness in local and global markets? We address these questions by calibrating and simulating a conceptual framework that, based on Melitz and Ottaviano (2005), predicts that tougher and more transparent international competition forces less productive firms out the market, thereby increasing average productivity as well as reducing average prices and mark-ups. The model also predicts a parallel reduction of price dispersion within sectors. Our conceptual framework allows us to disentangle the effects of technology and freeness of entry from those of accessibility. On the one hand, by controlling for the impact of trade frictions, we are able to construct an index of ‘revealed competitiveness’, which would drive the relative performance of countries in an ideal world in which all faced the same barriers to international transactions. On the other hand, by focusing on the role of accessibility while keeping ‘revealed competitiveness’ as given, we are able to evaluate the impacts of EMU and enlargement on the competitiveness of European firms. We find that EMU positively affects the competitiveness of firms located in participating economies. Enlargement has, instead, two contrasting effects. It improves the accessibility of EU members but it also increases substantially the relative importance of unproductive competitors from Eastern Europe. JEL Classification: F12, R13.
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Determinants of International Fragmentation of Production in the European Union
Götz Zeddies
IWH Discussion Papers,
No. 15,
2007
Abstract
The last decades were characterized by large increases in world trade, not only in absolute terms, but also in relation to world GDP. This was in large parts caused by increasing exchanges of parts and components between countries as a consequence of international fragmentation of production. Apparently, greater competition especially from the Newly Industrializing and Post-Communist Economies prompted firms in ‘high-wage’ countries to exploit international factor price differences in order to increase their international competitiveness. However, theory predicts that, beside factor price differences, vertical disintegration of production should be driven by a multitude of additional factors. Against this background, the present paper reveals empirical evidence on parts and components trade as an indicator for international fragmentation of production in the European Union. On the basis of a panel data approach, the main explanatory factors for international fragmentation of production are determined. The results show that, although their influence can not be neglected, factor price differences are only one out of many causes for shifting production to or sourcing components from foreign countries.
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