Can Korea Learn from German Unification?
Ulrich Blum
IWH Discussion Papers,
No. 3,
2011
Abstract
We first analyze pre-unification similarities and differences between the two Germanys and the two Koreas in terms of demographic, social, political and economic status. An important issue is the degree of international openness. “Stone-age” type communism of North Korea and the seclusion of the population prevented inner-Korean contacts and contacts with rest of the world. This may create enormous adjustment costs if institutions, especially informal institutions, change. We go on by showing how transition and integration interact in a potential unification process based on the World Bank Revised Minimum Standard Model (RMSM) and on the Salter-Swan-Meade model. In doing so, we relate the macro and external impacts on an open economy to its macro-sectoral structural dynamics. The findings suggest that it is of utmost importance to relate microeconomic policies to the macroeconomic ties and side conditions for both parts of the country. Evidence from Germany suggests that the biggest general error in unification was neglecting these limits, especially limitations to policy instruments. Econometric analysis supports these findings. In the empirical part, we consider unification as an “investment” and track down the (by-and-large immediate to medium-term) costs and the (by-and-large long-term) benefits of retooling a retarded communist economy. We conclude that, from a South-Korean
perspective, the Korean unification will become relatively much more expensive than the German unification and, thus, not only economic, but to a much larger degree political considerations must include the tying of neighboring countries into the convergence process. We finally provide, 62 years after Germany’s division and 20 years after unification, an outlook on the strength of economic inertia in order to show that it may take much more than a generation to compensate the damage inflicted by the communist system.
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Stochastic Income Statement Planning as a Basis for Risk Assessment in the Context of Emissions Trading
Henry Dannenberg, Wilfried Ehrenfeld
Greenhouse Gas Measurement and Management,
No. 1,
2011
Abstract
The introduction of the European emissions trading system means that those enterprises taking part have a new planning risk factor to consider – emissions allowance prices. In this article, we analyse how risk emerging from emissions trading can be considered in the stochastic income statement planning of corporations. Therefore, we explore which planned figures are affected by emissions trading. Moreover, we show an approach that models these positions in a planned profit and loss account, taking into account uncertainties and dependencies. Consequently, this model provides a basis for risk assessment and investment decisions in the uncertain environment of emissions trading.
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Corporate Governance in the Multinational Enterprise: A Financial Contracting Perspective
Diemo Dietrich, Björn Jindra
International Business Review,
2010
Abstract
The aim of this paper is to bring economics-based finance research more into the focus of international business theory. On the basis of an analytical model that introduces financial constraints into incomplete contracting in an international vertical trade relationship, we propose an integrated framework that facilitates the study of the interdependencies between internalisation decisions, firm-internal allocations of control rights, and the debt capacity of firms. We argue that the financial constraint of an MNE and/or its supplier should be considered as an important determinant of internal governance structures, complementary to, and interacting with, institutional factors and proprietary knowledge.
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Government Interventions in Banking Crises: Assessing Alternative Schemes in a Banking Model of Debt Overhang
Diemo Dietrich, Achim Hauck
Abstract
We evaluate policy measures to stop the fall in loan supply following a banking crisis. We apply a dynamic framework in which a debt overhang induces banks to curtail lending or to choose a fragile capital structure. Government assistance conditional on new banking activities, like on new lending or on debt and equity issues, allows banks to influence the scale of the assistance and to externalize risks, implying overinvestment or excessive risk taking or both. Assistance granted without reference to new activities, like establishing a bad bank, does not generate adverse incentives but may have higher fiscal costs.
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Differences in Labor Supply to Monopsonistic Firms and the Gender Pay Gap: An Empirical Analysis Using Linked Employer‐Employee Data from Germany
Boris Hirsch, Thorsten Schank, Claus Schnabel
Journal of Labor Economics,
No. 2,
2010
Abstract
This article investigates women’s and men’s labor supply to the firm within a semistructural approach based on a dynamic model of new monopsony. Using methods of survival analysis and a large linked employer‐employee data set for Germany, we find that labor supply elasticities are small (1.9–3.7) and that women’s labor supply to the firm is less elastic than men’s (which is the reverse of gender differences in labor supply usually found at the level of the market). Our results imply that at least one‐third of the gender pay gap might be wage discrimination by profit‐maximizing monopsonistic employers.
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Are there Gender-specific Preferences for Location Factors? A Grouped Conditional Logit-model of Interregional Migration Flows in Germany
Lutz Schneider, Alexander Kubis
Schmollers Jahrbuch,
2010
Abstract
The article analyses the question of whether women and men differ in their tastes for location factors. The question is answered by quantifying the impact of location characteristics on interregional migration flows across Germany. The analysis is based on a grouped conditional logit approach. We augment the framework by controlling for violation of the independence of irrelevant alternatives assumption and for overdispersion. As a result we find no differences in terms of direction of impact; however, the regressions confirm gender differences, mostly in terms of intensity, regarding regional wage levels and the availability of educational institutions. Moreover, even after controlling for place attributes women seem to be more migratory than men.
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Transmission of Nominal Exchange Rate Changes to Export Prices and Trade Flows and Implications for Exchange Rate Policy
Mathias Hoffmann, Oliver Holtemöller
Scandinavian Journal of Economics,
2010
Abstract
We discuss how the welfare ranking of fixed and flexible exchange rate regimes in a New Open Economy Macroeconomics model depends on the interplay between the degree of exchange rate pass-through and the elasticity of substitution between home and foreign goods. We identify combinations of these two parameters for which flexible and fixed exchange rates are superior with respect to welfare as measured by a representative household's utility level. We estimate the two parameters for six non-EMU European countries (Czech Republic, Hungary, Poland, Slovakia, Sweden, and the UK) using a heterogeneous dynamic panel approach.
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What Happened to the East German Housing Market? A Historical Perspective on the Role of Public Funding
Claus Michelsen, Dominik Weiß
Post-Communist Economies,
2010
Abstract
The paper analyses the development of the East German housing market after the reunification of the former German Democratic Republic and the Federal Republic of Germany in 1990. We analyse the dynamics of the East German housing market within the framework of the well-known stock-flow model, proposed by DiPasquale and Wheaton. We show that the today observable disequilibrium to a large extend is caused by post-unification housing policy and its strong fiscal incentives to invest into the housing stock. Moreover, in line with the stylized empirical facts, we show that ‘hidden reserves’ of the housing market were reactivated since the economy of East Germany became market organized. Since initial undersupply was overcome faster than politicians expected, the implemented fiscal stimuli were too strong. In contrast to the widespread opinion that outward migration caused the observable vacancies, this paper shows that not weakness of demand but supply side policies caused the observable disequilibrium.
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