Tentative Recovery, Public Debt on the Rise
Wirtschaft im Wandel,
2. Sonderausgabe
2009
Abstract
In autumn 2009, the world economy appears to be growing again. The situation has improved mainly because drastic measures of central banks and governments stabilized the financial sector. More recently, the real economy is supported by fiscal programs taking effect. However, recoveries are usually slow if, as it is the case now, recessions have been intertwined with banking and housing crises. Thus, the industrial economies will not gain much dynamics this year and next, while chances for an upswing in emerging economies are much better.
The German economy stabilized during summer as well, with remarkably robust private consumption. An upswing, however, is, due to several factors, not in sight: Some important export markets will not rebound quickly, and consumption will be dampened by rising unemployment that, up to now, has been contained, not least with the aid of short-term working schemes. All in all, production shrinks by 5% in 2009 and will increase by no more than 1.2% next year. Public deficits are on the rise, with (in relation to GDP) 3.2% this year and 5.2% in 2010.
A credit crunch due to deteriorating balance sheets of banks is a major risk for the German economy. Policy should address this problem by making sure that equity ratios are sufficiently high. One way would be to impose public capital on banks that do not comply with certain regulatory ratios. These should be higher than the ones presently in force. Fiscal policy should begin consolidating in 2011, mainly by dampening the rise of expenditures. Tax cuts are only justified if they are accompanied by very ambitious spending cuts.
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Cartel Identification in Spatial Markets: An Analysis of the East German Cement Market
Ulrich Blum
Jahrbuch für Regionalwissenschaft,
2009
Abstract
In 2003, the German cement industry was fined more than six hundred million Euros for, allegedly, having fixed prices and quantities in the four regional German cement markets. When this case was finally resolved by the courts in 2009, the fine was reduced by a large amount as the German Antitrust Commission (GAC) was unable to provide sufficient evidence on the level excessive pricing by the cartelists.
This paper takes up again the case of the East German cement cartel that ended in early 2002 and shows that the quota agreement which was established in the mid 1990s was economically inactive. From the perspective of the individual players, the rationale of preserving the cartel can only be explained by limited knowledge of the true market forces. Based on a spatial approach for the years 1997 to 2002, the regional price-setting behavior and its changes can be analyzed against the situation. Econometric analysis suggests that competition was already rather strong in the cartel years as transport costs and rebate systems were used to fine-tune offers. Strategic imports from post-communist countries into the East German market as well as supply from medium-sized enterprises not included in the cartel exerted pressure on the markets.
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East German Exports: Remarkable Catch-up, but Still Lagging Behind
Götz Zeddies
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 1 -
2009
Abstract
German reunification entailed severe adjustment processes in East German export industries. With political and economic transition in Eastern Europe, at that time the main export market for East German producers, export demand initially collapsed in the early 1990s. Additionally, the introduction of the Deutschmark in Eastern Germany amounted to a massive revaluation, and international competitiveness of East German producers deteriorated. However, manufacturers in the New Federal States opened up new markets, especially in Western Europe and the Americas. As a consequence, after the downturn of construction activity and investment in the mid-1990s, international trade became the driving force of GDP-growth in Eastern Germany. Although since then, goods exports of the New Federal States grew twice as much as those of Western Germany, export ratio (goods exports as a percentage of GDP) only amounts to 22 per cent in Eastern Germany, compared to 42 per cent in the western part of the country. Even in comparison to Eastern European countries in transition, openness to trade of the New Federal States is still comparatively low. As an empirical analysis shows, this must be largely traced back to smaller firm sizes in the New Federal States as well as to the lower importance of manufacturing industries, which are traditionally more export-oriented. Moreover, East German manufacturers largely specialized on intermediate inputs, which are supplied to final assembly lines in Western Germany, but are not recorded as exports. Thereby, East German export performance is considerably underestimated.
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New Growth and Poverty Alleviation Strategies for Africa – Institutional and Local Perspectives. African Development Perspectives Yearbook, Vol. 14
Tobias Knedlik, Karl Wohlmuth, Philippe Burger, Achim Gutowski, Mareike Meyn, T. (eds) Urban, Afeikhena Jerome
,
2009
Abstract
The Volume XIV analyses the “New Growth and Poverty Alleviation Strategies for Africa“. Institutional issues and perspectives in designing new growth and poverty alleviation strategies are considered in various case studies (Cote d'Ivoire, Nigeria, Botswana and Tanzania). Other studies deal with institutional problems of resource-rich countries after conflict (Sudan) and with the institutions to enhance environmental protection parallel to economic growth and poverty reduction (Niger). Further studies deal with institutions to bridge the gap between formal and informal entrepreneurial sectors in Kenya and Tanzania. Local issues and perspectives for designing new growth and poverty alleviation strategies are considered in case studies on rural-urban development gaps in Tanzania and on microfinance as an instrument for new growth and poverty alleviation strategies (Tanzania and Eritrea). A study on small farmers in Ghana provides information on the role they can play in value chains. Two studies on Nigeria highlight the local and the sub-regional health and poverty alleviation programmes and the relation to growth. Book reviews and book notes on the theme are part of the volume. This volume builds the foundation for a comprehensive strategy of policy reforms in Africa so as to integrate new growth and poverty alleviation strategies. Complementary to Volume XIV is Volume XIII on “New Growth and Poverty Alleviation Strategies for Africa - Interational and Regional Perspectives“. Both volumes are of importance for all those who work in African countries as officials, executives, managers, researchers, and policy-makers, but also for all those who actively support Africa's development concerns at the international, regional, country, local, and project levels. They will experience this Volume XIV and also the complementary Volume XIII as indispensable sources of insight, reference, and inspiration.
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Finanzielle Instabilität und Krise in den Post-Transformations-Ländern
Hubert Gabrisch
Wirtschaftspolitische Blätter,
No. 3,
2009
Abstract
Contagion was only the trigger of the unexpectedly severe crisis in European post-transition countries. Rather, increasing financial fragility of the countries since 2001, after their banking and financial sector was overtaken by international financial institutions, was the origin. Euphoric expectations induced an asset price inflation followed by an increasing debt burden of the private sector, which was fueled by net capital inflows. This study argues that simple concepts of demand reduction do not offer any way out of the crisis. A second transition is necessary, which establishes a new growth model being robust against speculative capital flows and offering high growth rates.
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Smuggling Illegal versus Legal Goods across the U.S.-Mexico Border: A Structural Equations Model Approach
A. Buehn, Stefan Eichler
Southern Economic Journal,
No. 2,
2009
Abstract
We study the smuggling of illegal and legal goods across the U.S.-Mexico border from 1975 to 2004. Using a Multiple Indicators Multiple Causes (MIMIC) model we test the microeconomic determinants of both smuggling types and reveal their trends. We find that illegal goods smuggling decreased from $116 billion in 1984 to $27 billion in 2004 as a result of improved labor market conditions in Mexico and intensified U.S. border enforcement. Smuggling legal goods is motivated by tax and tariff evasion. While export misinvoicing fluctuated at low levels, import misinvoicing switched from underinvoicing to overinvoicing after Mexico's accession to the GATT and the North American Free Trade Agreement (NAFTA) induced lower tariffs.
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Foreign Investors and Domestic Suppliers: What Feeds Positive External Effects?
Jutta Günther, Björn Jindra, Daniel Sischka
Wirtschaft im Wandel,
No. 9,
2009
Abstract
The empirical study analyses the potential for positive external effects from foreign investors in favor of domestic firms using the IWH-FDI micro database and taking into account firm-specific characteristics of foreign investors in selected Central and East European countries as well as in Eastern Germany. The analysis shows that only half of the foreign investors believe that they are important for technological activities in domestic supplier firms. Thereby, the potential for external positive effects is higher in Central and Eastern Europe than in Eastern Germany. A reason for this might be that supplier firms in Eastern Germany already operate on a clearly higher technological level than their counterparts in Central and Eastern Europe. Taking into account the share of domestic supplies of foreign investors, it shows that the potential for positive external effects increases only to a certain point from which on the spillover potential stagnates or even declines. Furthermore, there is clear evidence for the following characteristics of foreign investors to increase the potential for positive external effects: innovativeness of the foreign investor, internal and external technological cooperation of foreign investors, independence from the headquarters in research and development issues and market entry through acquisition (instead of greenfield investment). The share of foreign participation as well as the duration of presence in the host economy does not show any statistically significant effect on the potential for external effects. Policy makers should therefore not only aim at the settlement of employment intensive foreign investors, but also and particularly support investors that are characterized by technological activity and regional integration.
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Finanzierung kommunaler Aufgaben: Ökonomische Prinzipien, moderne Herausforderungen und institutionelle Gestaltungsmöglichkeiten
Martin T. W. Rosenfeld
Position Liberal, Bd. 88,
2009
Abstract
The publication is based on the economic principles for an efficient local public revenue system. The main part of the publication is examining the question how different categories of revenues (taxes, user fees, grants-in-aid) and different arrangements of these revenues are able to meet with these principles. In addition, it is asked for the implications of recent developments (demographic change; increasing importance of the competitiveness of cities) for the choice between different categories of revenues. Finally, it is discussed how it could be possible in countries like Germany – where the existing local public revenue system is quite far away from what is regarded as efficient – to come to an institutional change in the direction of a better way of financing the local level.
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Financial constraints and the margins of FDI
Claudia M. Buch
Bundesbank Discussion Paper 29/2009,
2009
Abstract
Recent literature on multinational firms has stressed the importance of low productivity as a barrier to the cross-border expansion of firms. But firms may also need external finance to shoulder the costs of entering foreign markets. We develop a model of multinational firms facing real and financial barriers to foreign direct investment (FDI), and we analyze their impact on the FDI decision (the extensive margin) and foreign affiliate sales (the intensive margin). We provide empirical evidence based on a detailed dataset of German multinationals which contains information on parent-level and affiliate-level financial constraints as well as about the location the foreign affiliates. We find that financial factors constrain firms’ foreign investment decisions, an effect felt in particular by large firms. Financial constraints at the parent level matter for the extensive, but less
so for the intensive margin. For the intensive margin, financial constraints at the affiliate level are relatively more important.
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Investitionszuschüsse nur bei Schaffung von Arbeitsplätzen? Schlussfolgerungen aus der Förderung eines Investitionsprojektes über die Gemeinschaftsaufgabe im Land Brandenburg
Mirko Titze
Zeitschrift für Wirtschaftspolitik,
2009
Abstract
The Joint Task “For the Improvement of the Regional Economic Structure“ is one of the most important Instruments of the German regional policy. This instrument is applied in regions with strong structural problems and aims to reduce unemployment. The instruments institutional framework demands the creation of additional permanent posts. This paper explores that these requirements can provoke inefficient combinations of production factors. The reasons for that problem can be seen in market failures as well as political disappointments. The government of each federal state has an incentive to demand permanent posts as much as possible because public revenue can equal the government expenditures after a relative short time period due to employment and production effects. The institutional framework of the German financial equalization scheme between the federal states contributes to that problem too - the expenditures for subsidization can be balanced by perequations paid by the other federal states.
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