19.03.2018 • 4/2018
Economists – and the others
People with a background in economics react more strongly to financial incentives – both positively and negatively, as Dmitri Bershadskyy of the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association – found out. At the beginning of his laboratory experiment, economists were prepared to spend more money on a public good and keep to this social behaviour for a longer period than non-economists. However, towards the end of the experiment they were also the greatest free-riders.
Dmitri Bershadskyy
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Does Intermunicipal Cooperation Increase Efficiency? A Conditional Metafrontier Approach for the Hessian Wastewater Sector
F. Blaeschke, Peter Haug
Local Government Studies,
No. 1,
2018
Abstract
This paper analyses the relationship between intermunicipal cooperation and efficiency of public service provision. Organisational arrangements of public service production, including self-provision, joint provision or contracting, affect incentives and internal transaction costs. Hence, cooperation gains from scale effects need to be balanced against technical inefficiencies. We analyse relative efficiency of wastewater disposal for German municipalities. We employ a conditional analysis in conjunction with a metafrontier approach to calculate relative efficiency measures and technology gap ratios controlling for organisational arrangements and further environmental variables. Jointly providing municipalities and contractor municipalities exhibit lower technical efficiency than self-providing and contracting municipalities. As confirmed by previous research, scale effects from cooperation and contracting apply to small municipalities primarily.
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Endogenous Institution Formation in Public Good Games: The Effect of Economic Education
Martin Altemeyer-Bartscher, Dmitri Bershadskyy, Philipp Schreck, Florian Timme
IWH Discussion Papers,
No. 29,
2017
Abstract
In a public good experiment, the paper analyses to which extent individuals with economic education behave differently in a second-order dilemma. Second-order dilemmas may arise, when individuals endogenously build up costly institutions that help to overcome a public good problem (first-order dilemma). The specific institution used in the experiment is a communication platform allowing for group communication before the first-order public good game takes place. The experimental results confirm the finding of the literature that economists tend to free ride more intensively in public good games than non-economists. The difference is the strongest in the end-game phase, yielding in the conclusion that the magnitude of the end-game effect depends on the share of economists in the pool of participants. When it comes to the building-up of institutions, the individual efficiency gain of the institution and its inherent cost function constitute the driving forces for the contribution behaviour. Providing an investment friendly environment yields in economists contributing more to the institution than non-economists. Therefore, we make clear that first-order results of a simple public good game cannot be simply applied for second-order incentive problems.
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How Can We Boost Competition in the Services Sector?
Oliver Holtemöller
Externer Herausgeberband, Nomos,
2017
Abstract
‘How Can We Boost Competition in the Services Sector?’ is a key question in the process of creating a more effi-cient economic environment in Germany. This book contains a collection of conference contributions on service sector reforms from members of academic institutions, ministries, the EU Commission and other organisations. The conference consisted of a keynote on the importance and implementation of structural reforms in Europe and two panels that dealt with the evaluation of past reforms in the services sector and the potential scope and effects of further reforms. Since the 1990s, productivity growth in Germany and other Member States of the European Union has been significantly lower than in the US. The development of productivity growth in the services sector is estimated to account for two thirds of this widening gap. The European Commission advocated reforms in the services sector in its country-specific recommendations for Germany. At a conference in Berlin in July 2016, experts from various fields presented and discussed studies on service sector reforms.
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Bank Overall Financial Strength: Islamic Versus Conventional Banks
Michael Doumpos, Iftekhar Hasan, Fotios Pasiouras
Economic Modelling,
2017
Abstract
A number of recent studies compare the performance of Islamic and conventional banks with the use of individual financial ratios or efficiency frontier techniques. The present study extends this strand of the literature, by comparing Islamic banks, conventional banks, and banks with an Islamic window with the use of a bank overall financial strength index. This index is developed with a multicriteria methodology that allows us to aggregate various criteria capturing bank capital strength, asset quality, earnings, liquidity, and management quality in controlling expenses. We find that banks differ significantly in terms of individual financial ratios; however, the difference of the overall financial strength between Islamic and conventional banks is not statistically significant. This finding is confirmed with both univariate comparisons and in multivariate regression estimations. When we look at the bank financial strength within regions, we find that conventional banks outperform both the Islamic banks and the banks with Islamic window in the case of Asia and the Gulf Cooperation Council; however, Islamic banks perform better in the MENA and Senegal region. Second stage regressions also reveal that the bank overall financial strength index is influenced by various country-specific attributes. These include control of corruption, government effectiveness, and operation in one of the seven countries that are expected to drive the next big wave in Islamic finance.
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Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown
Ryan A. Decker, John Haltiwanger, Ron S. Jarmin, Javier Miranda
American Economic Review: Papers and Proceedings,
No. 5,
2017
Abstract
A large literature documents declining measures of business dynamism including high-growth young firm activity and job reallocation. A distinct literature describes a slowdown in the pace of aggregate labor productivity growth. We relate these patterns by studying changes in productivity growth from the late 1990s to the mid 2000s using firm-level data. We find that diminished allocative efficiency gains can account for the productivity slowdown in a manner that interacts with the within-firm productivity growth distribution. The evidence suggests that the decline in dynamism is reason for concern and sheds light on debates about the causes of slowing productivity growth.
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Banks Credit and Productivity Growth
Fadi Hassan, Filippo di Mauro, Gianmarco Ottaviano
ECB Working Paper,
No. 2008,
2017
Abstract
Financial institutions are key to allocate capital to its most productive uses. In order to examine the relationship between productivity and bank credit in the context of different financial market set-ups, we introduce a model of overlapping generations of entrepreneurs under complete and incomplete credit markets. Then, we exploit firm-level data for France, Germany and Italy to explore the relation between bank credit and productivity following the main derivations of the model. We estimate an extended set of elasticities of bank credit with respect to a series of productivity measures of firms. We focus not only on the elasticity between bank credit and productivity during the same year, but also on the elasticity between credit and future realised productivity. Our estimates show a clear Eurozone core-periphery divide, the elasticities between credit and productivity estimated in France and Germany are consistent with complete markets, whereas in Italy they are consistent with incomplete markets. The implication is that in Italy firms turn to be constrained in their long-term investments and bank credit is allocated less efficiently than in France and Germany. Hence capital misallocation by banks can be a key driver of the long-standing slow productivity growth that characterises Italy and other periphery countries.
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European Bank Efficiency and Performance: The Effects of Supranational Versus National Bank Supervision
Rients Galema, Michael Koetter
T. Beck, B. Casu (eds): The Palgrave Handbook of European Banking, London,
2016
Abstract
This chapter explores European bank efficiency and performance. First, the authors provide an overview of the key estimation methods for efficiency and discuss selected applications to the European banking sector. Second, they apply stochastic frontier analysis to investigate the extent to which the reallocation of supervisory powers is associated with efficiency differences between European banks. In doing so, the discussion focuses particularly on whether direct supervision by the Single Supervisory Mechanism (SSM) as opposed to national competent authority (NCA) is related to cost and profit efficiency.
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On the Distribution of Refugees in the EU
Oliver Holtemöller, Axel Lindner, Andreas Schmalzbauer, Götz Zeddies
Intereconomics,
No. 4,
2016
Abstract
The current situation regarding the migration of refugees can only be handled efficiently through closer international cooperation in the field of asylum policy. From an economic point of view, it would be reasonable to distribute incoming refugees among all EU countries according to a distribution key that reflects differences in the costs of integration in the individual countries. An efficient distribution would even out the marginal costs of integrating refugees. In order to reach a political agreement, the key for distributing refugees should be complemented by compensation payments that distribute the costs of integration among countries. The key for distributing refugees presented by the EU Commission takes account of appropriate factors in principle, but it is unclear in terms of detail. The compensation payments for countries that should take relatively high numbers of refugees for cost efficiency reasons should be financed by reallocating resources within the EU budget.
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The Role of Information in Innovation and Competition
Ufuk Akcigit, Qingmin Liu
Journal of the European Economic Association,
No. 4,
2016
Abstract
Innovation is typically a trial‐and‐error process. While some research paths lead to the innovation sought, others result in dead ends. Because firms benefit from their competitors working in the wrong direction, they do not reveal their dead‐end findings. Time and resources are wasted on projects that other firms have already found to be fruitless. We offer a simple model with two firms and two research lines to study this prevalent problem. We characterize the equilibrium in a decentralized environment that necessarily entails significant efficiency losses due to wasteful dead‐end replication and an information externality that leads to an early abandonment of the risky project. We show that different types of firms follow different innovation strategies and create different kinds of welfare losses. In an extension of the core model, we also study a centralized mechanism whereby firms are incentivized to disclose their actions and share their private information in a timely manner.
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