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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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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Implementation of Competition Law in Developing and Transition Countries. Theoretical and Empirical Considerations
Franz Kronthaler
Schriften des IWH,
No. 26,
2007
Abstract
The success of free market economies over the last 200 years supports the notion that competition increases individual and social wealth. Developing countries that have undergone the necessary reforms today are amongst the most driving “emerging” economies in the world.
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The German Upswing Takes a Break
Wirtschaft im Wandel,
2. Sonderausgabe
2007
Abstract
The world economy continues to expand healthily, but risks have increased during summer. The crisis of the housing sector in the US has deepened: A revaluation of mortgage backed assets has triggered turbulences on global financial markets. The institutes expect that financial markets will calm down during the coming months, but that the downswing in the US will slow the pace of the world economy. The economy in the euro area will, in addition, be dampened by the appreciation of the euro. The German economy is, in spite of a restrictive fiscal policy, in a robust upswing. Because wage setting and inflation continues to be moderate, there will be no need for a restrictive monetary policy. Thus the German economy will, due to slower demand from the US and higher costs of financing, lose momentum, but chances are good that the upswing will only take a break. In the coming year private consumption is expected to be the main contributor to growth, because wage incomes will expand strongly. Unemployment will continue to shrink, albeit at a smaller rate than during 2007. Fiscal policy will no longer be restrictive. Economic policy has improved the conditions for growth in Germany; there is, however, still much to do. Public finances have to be consolidated further, but at the same time, public investment has to be strengthened. This can be achieved if public consumptive expenditure growth is limited. The institutes suggest to increase public expenditure by 2% per annum over the cycle in nominal terms; this is, by less than by the trend growth rate of nominal GDP.
The institutes advise against a reversal of the recent labour market reforms. Instead, incentives for taking up jobs should be increased further.
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Business Cycle Update Summer 2007: German Upswing Still Healthy
Wirtschaft im Wandel,
No. 8,
2007
Abstract
In the summer of 2007, the economies of the European Union and Japan continue their upswing, while the USA is still suffering from economic weakness. The expansion of the East Asian economies remains highly dynamic. Compared to the beginning of the year, conditions at the global financial markets have deteriorated slightly: Long-term interest rates have risen considerably; with notably more than half of a percentage point the increase was especially pronounced in the Euro Area. Furthermore, markets have become increasingly volatile. The less favourable conditions at the global financial markets, among other reasons, will cause the upswing in the Euro Area and Japan to slightly slow down. While the USA will not enter a phase of stagnation, the economy will continue to expand at rates below its potential until 2008. In Germany, the economic recovery took a temporary break in the first half of 2007. While special circumstances (first, brought forward purchases in anticipation of the increase in the value added tax and second, the high construction activity because of the end of home owners subsidies) raised considerably economic activity towards the end of 2006, they caused a downturn in demand in the beginning of 2007. After this short dip, the upswing will recommence. Private consumption will be the main driving force, as incomes have increased considerably in the wake of the improved labour markets conditions. The upswing will continue next year, albeit at a slower pace. Higher interest rates, the appreciation of the Euro and the expected rise in labour costs will have some impact. Overall domestic demand will slow down, but only a little, as household consumption increases. GDP will expand by 2.6% and 2.5% in this and next year, respectively. The number of unemployed persons will decline below 3.5 million in 2008.
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Institutionelle Defizite und wachsende Spannungen in der Euro-Zone
Hubert Gabrisch
Wirtschaft im Wandel,
No. 7,
2007
Abstract
The introduction of the Euro was certainly a success. Nevertheless, behind this success one may find some increasing asymmetries and imbalances across member countries, which may undermine the stability of the common currency in the long run. Tensions include the paralysis of fiscal policy, increasing divergence in per capita income, a high volatility of real state prices, and diverging unit labour cost developments. The given forms of macroeconomic coordination seem not to be appropriate to mitigate the problems. Obviously, countries can compete with wage policy only after currencies and their exchange rates were abolished, and the use of fiscal policy has been restricted. In particular, Germany and Austria were successful in competitive wage policy, while countries like Spain, Greece, Portugal, Italy, and also France did not yet use the competitiveness channel. Germany was able to reduce its unit labour costs more than other countries by labour market reforms and higher indirect taxes in replacing social taxes. However, the advantage may proof to be temporary only, for other countries will be forced to follow the German example. Given an ECB inflation target of 2 %, more competitive wage policy in the Euro area might jeopardize the stability of the currency through deflation and higher unemployment. It does not wonder that the discussion on other and new forms of macroeconomic coordination revived recently. This debate does not only include the introduction of a central EU budget with anti-cyclical effects, but also forms of direct and indirect coordination of national wage policies. In any case, it would be useful to oblige national wage policies to obey the common interest of the Union.
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Konzept der Anreizethik zur Weiterentwicklung der sozialen Grundsicherung nach Hartz IV
Joachim Wilde
Zeitschrift für Wirtschafts- und Unternehmensethik,
2007
Abstract
Reforms of benefits for long-term unemployed in Germany are usually discussed in terms of workfare and financial incentives. This paper broadens the discussion with a concept of incentive ethics. It analyzes how the dependency on benefits can be left out by allocating so-called moral goods to the longterm unemployed. Comparing the new concept with the last reform ("Hartz IV"), the shortcomings of this reform are revealed. Thus, the paper concludes with a new reform proposal.
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Determinanten des Erfolgs im Transformationsprozess der mittel- und osteuropäischen Länder - eine empirische Würdigung der Beiträge von Karl Wohlmuth
Tobias Knedlik
Ökonomische Systeme im Wandel der Weltwirtschaft/Economic Systems in a Changing World Economy - Festschrift zum 65. Geburtstag von Professor Dr. Karl Wohlmuth,
2007
Abstract
In his academic career Prof Dr Karl Wohlmuth is, among others, concerned with questions of the economics of transformation. In early contributions regarding the transformation process of Eastern European countries, he deducts policy recommendations for a success-ful transformation process. The present paper summarizes the analyses of Wohlmuth and empirically evaluates - as an ex post analysis - determinants of success in the transforma-tion process. The central question is whether the determinants as identified by Wohlmuth had a significant influence on the success of transformation. The results are that the factors ‘reform of the private sector’, ‘liberalization of the labor market’, and ‘fiscal consolidation’ have been of special importance. It could therefore be shown that the factors that have been early identified by Wohlmuth played in deed an important role in the transformation proc-ess. Thus, his recommendations are of relevance for the ongoing process of transformation.
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Challenges for Formal Standardization: the Institutional Reforms 2008 – 2010 Reconsidered.
Ulrich Blum
Standardization Research in Information Technology: New Perspectives,
2007
Abstract
This study considers the developments in international standardization over the last 20 years, particularly the status of formal standardization as compared with consortium-based industrial standardization. The report shows that the radical reform of the global formal standardization system that started in 2008, prompted by the loss of interest in formal standardization on the part of large corporations and the sometimes less than satisfactory outcomes from consortium-based industrial standardization in terms of competition and anti-trust considerations, has helped to compensate for the declining significance of national formal standardization. This specifically relates to national governments, and is to be regarded as a clearly positive development, from both the economic and the institutional and political points of view. Global public interests are now catered for by internet-supported information markets; in particular, online documentation has also enhanced the transparency of the formal standardization process and provided freedom of access for small and medium sized companies in particular, irrespective of geographical region. Finally, the study shows that the debate that took place in and around the year 2004 between Europe and the USA regarding the path towards the internationalization of formal standardization processes was superfluous, incomplete and even counterproductive, owing to the hardening of the political divisions between the two sides.
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