Is There a Way for Old Industrial Districts to Become Attractive for Cultural Industry? The Case of Media Businesses in Halle (Saale), Germany
Martin T. W. Rosenfeld, Christoph Hornych
IWH Discussion Papers,
No. 15,
2008
Abstract
manufacturing have collapsed are trying to stimulate entrepreneurial activities of businesses in the cultural industry. The question is whether this strategy could be successful. This article examines the strategy of supporting the sector of Media Industry (´MI´) by policy makers in the region of Halle in East Germany, where a strong de-industrialization has taken place after the German reunification. Stimulated by the policy makers’ support measures, there actually was a remarkable development of MI. However, the number of MI firms and their employees did not further increase in recent years, after having reached a certain level. This illustrates the limits of political measures for turning a city’s path of industrial development voluntarily.
Read article
Financial Crisis Burdens Economic Activity in Poland
Martina Kämpfe
Wirtschaft im Wandel,
No. 12,
2008
Abstract
In the first half of the year 2008, domestic demand –the main force behind growth – only marginally declined. Still extraordinarily high was the demand for the output of construction firms. Although demand from Western European countries declined since spring, the foreign trade was not much behind its level of the previous year because of high export activity to Asian and Eastern European countries. In the second half of the year, both, the finance and banking system as well as the real economy, were impacted by the consequences of global financial crisis. Indications of that are the temporary collapse of the polish stock market, the rapid fall of the Złoty and the weakening of domestic demand and exports. Against this background, expansion of economic activity in 2009 will continue at a markedly lower level.
Read article
The Great Risk Shift? Income Volatility in an International Perspective
Claudia M. Buch
CESifo Working Paper No. 2465,
2008
Abstract
Weakening bargaining power of unions and the increasing integration of the world economy may affect the volatility of capital and labor incomes. This paper documents and explains changes in income volatility. Using a theoretical framework which builds distribution risk into a real business cycle model, hypotheses on the determinants of the relative volatility of capital and labor are derived. The model is tested using industry-level data. The data cover 11 industrialized countries, 22 manufacturing and services industries, and a maximum of 35 years. The paper has four main findings. First, the unconditional volatility of labor and capital incomes has declined, reflecting the decline in macroeconomic volatility. Second, the idiosyncratic component of income volatility has hardly changed over time. Third, crosssectional heterogeneity in the evolution of relative income volatilities is substantial. If anything, the labor incomes of high- and low-skilled workers have become more volatile in relative terms. Fourth, income volatility is related to variables measuring the bargaining power of workers. Trade openness has no significant impact.
Read article
Globalisation and the Competitiveness of the Euro Area
Filippo di Mauro, Katrin Forster
ECB Occasional Paper Series,
No. 97,
2008
Abstract
Against the background of increasing competition and other significant structural changes implied by globalisation, maintaining and enhancing competitiveness has evolved into one of the prime concerns in most countries. Following up on previous work (see in particular ECB Occasional Papers No. 30 and No. 55), this Occasional Paper examines the latest developments and prospects for the competitiveness and trade performance of the euro area and the euro area countries. Starting from an analysis of most commonly used, traditional competitiveness indicators, the paper largely confirms the findings of previous studies that there have been substantial adjustments in euro area trade. Euro area firms have taken advantage of the new opportunities offered by globalisation, and have at the same time been increasingly challenged by emerging economies. This is primarily reflected in the loss of export market shares which have been recorded over the last decade. While these can partly be related to the losses in the euro area's price competitiveness, further adjustment also seems warranted with regard to the export specialisation. Compared with other advanced competitors, the euro area remains relatively more specialised in labour intensive categories of goods and has shown only a few signs of a stronger specialisation in research-intensive goods. Nevertheless, the paper generally calls for a more cautious approach when assessing the prospects for euro area competitiveness, as globalisation has made it increasingly difficult to define and measure competitiveness. Stressing the need to take a broader view on competitiveness, specifically with a stronger emphasis on productivity performance, the paper also introduces a more elaborate framework that takes into account the interactions between country-specific factors and firm-level productivity. It thus makes it possible to construct more broadly defined competitiveness measures. Pointing to four key factors determining the global competitiveness of euro area countries - market accessibility, market size, technological leadership of firms and institutional set-up - the analysis provides further arguments for continuing efforts to increase market integration and strengthen the competitive environment within Europe as a mean of enhancing resource allocation and coping with the challenges globalisation creates.
Read article
Exchange Rates and FDI: Goods versus Capital Market Frictions
Claudia M. Buch, J. Kleinert
World Economy,
forthcoming
Abstract
Changes in exchange rates affect countries through their impact on cross-border activities such as trade and foreign direct investment (FDI). With increasing activities of multinational firms, the FDI channel is likely to gain in importance. Economic theory provides two main explanations why changes in exchange rates can affect FDI. According to the first explanation, FDI reacts to exchange rate changes if there are information frictions on capital markets and if investment depends on firms’ net worth (capital market friction hypothesis). According to the second explanation, FDI reacts to exchange rate changes if output and factor markets are segmented, and if firm-specific assets are important (goods market friction hypothesis). We provide a unified theoretical framework of these two explanations. We analyse the implications of the model empirically using a dataset based on detailed German firm-level data. We find greater support for the goods market than for the capital market friction hypothesis.
Read article
The Changing Role of the Exchange Rate in a Globalised Economy
Irina Bunda, Filippo di Mauro, Rasmus Rüffer
ECB Occasional Paper Series,
No. 94,
2008
Abstract
In addition to its direct effects on the global trading and production structure, the ongoing process of globalisation may have important implications for the interaction of exchange rates and the overall economy. This paper presents evidence regarding possible changes in the role of exchange rates in a more globalised economy. First, it analyses the link between exchange rates and prices, showing that there is at most a moderate decline in exchange rate pass-through for the euro area. Next, it turns to the effect of exchange rate changes on trade flows. The findings indicate that the responsiveness of euro area exports to exchange rate changes may have declined somewhat as a result of globalisation, reflecting mainly shifts in the geographical and sectoral composition of trade flows. The paper also provides a firm-level analysis of the impact of exchange rate changes on corporate profits, which suggests that overall this relationship appears to be relatively stable over time, although there are important cross-country differences. In addition, it studies the overall impact of exchange rates on GDP and the potential role of valuation effects as a transmission channel in the case of the euro area. JEL Classification: E3, F15, F31
Read article
Wie effektiv sind Technologie- und Gründerzentren in den Neuen Bundesländern?
Michael Schwartz
List Forum für Wirtschafts- und Finanzpolitik,
2008
Abstract
In Eastern Germany, since the beginning of the 1990s technology centers and business incubators are established by cities and municipalities to provide a favorable business environment for young and newly founded innovative firms. Right from the beginning, the effectiveness of these support facilities has been the subject of intense academic and policy discussions, but empirical evidence on the actual effectiveness of these centers is limited so far. Taking into account that the choice of the appropriate criteria for evaluations of the effectiveness of technology centers and business incubators is far from clear cut, this article focuses on three core indicators that are generally accepted as measures for effectiveness (incubation time, share of newly founded firms in the tenant portfolio and technological level of the supported firms), and analyses for five business incubators in East Germany whether they can be characterized as being effective policy instruments. A positive assessment of the five incubators’ effectiveness can be made with regard to average incubation time of tenant companies, as well as insofar the share of newly founded firms on all supported companies is concerned. However, deficiencies are found regarding the technological level of the incubator firms.
Read article
Russia: Ongoing Strong Economic Growth Overshadowed by High Inflation
Martina Kämpfe
Wirtschaft im Wandel,
No. 6,
2008
Abstract
Russian economic growth in 2007 again was driven by strong private consumption and investment, grew by double-digit rates. The roles of budget expenditures and borrowing of private and state-owned firms from abroad in financing investments increased rapidly. Russian inflation climbed again; it was driven up by increases in food prices in line with rising food prices around the world. Inflation pressures had sharpened through more budget spending and scheduled rate increases for electricity and gas as well as for regulated prices for municipal services. Broad money supply (M2) rose rapidly because of strong foreign currency inflows, too. Central bank seeks to bring inflation under control by tightening monetary policy this year. That will somewhat dampen economic growth, but nevertheless GDP growth in the near future will remain at high levels.
Read article
The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West
Johannes Stephan, Wolfgang Steffen
Eastern European Economics,
No. 6,
2008
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 market-based 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.
Read article
Capital Stock Approximation using Firm Level Panel Data: A Modified Perpetual Inventory Approach
Steffen Müller
Jahrbücher für Nationalökonomie und Statistik,
No. 4,
2008
Abstract
Many recent studies exploring conditional factor demand or factor substitution issues use firm level panel data. A considerable number of establishment panels contains no direct information on the capital input, necessary for production or cost function estimation. Incorrect measurement of capital leads to biased estimates and casts doubt on any inference on output elasticities or input substitution properties. The perpetual inventory approach, commonly used for long panels, is a method that attenuates these problems. In this paper a modified perpetual inventory approach is proposed. This method provides more reliable measures for capital input when short firm panels are used and no direct information on capital input is available. The empirical results based on a replication study of Addison et al. (2006) support the conclusion that modified perpetual inventory is superior to previous attempts in particular when fixed effects estimation techniques are used. The method thus makes a considerable number of recently established firm panels accessible to more sophisticated production function or factor demand analyses.
Read article