What Drives FDI in Central-eastern Europe? Evidence from the IWH-FDI-Micro Database
Andrea Gauselmann, Mark Knell, Johannes Stephan
Post-Communist Economies,
No. 3,
2011
Abstract
The focus of this paper is on the match between strategic motives of foreign investments into Central-Eastern Europe and locational advantages offered by these countries. Our analysis makes use of the IWH-FDI-Micro Database, a unique dataset that contains information from 2009 about the determinants of locational factors, technological activity of the subsidiaries, and the potentials for knowledge spillovers in the Czech Republic, Hungary, Poland, Romania, and Slovakia. The analysis suggests that investors in these countries are mainly interested in low (unit) labour costs coupled with a well-trained and educated workforce and an expanding market with the high growth rates in the purchasing power of potential buyers. It also suggests that the financial crisis reduced the attractiveness of the region as a source for localised knowledge and technology. There appears to be a match between investors’ expectations and the quantitative supply of unqualified labour, not however for the supply of medium qualified workers. But the analysis suggests that it is not technology-seeking investments that are particularly content with the capabilities of their host economies in terms of technological cooperation. Finally, technological cooperation within the local host economy is assessed more favourably with domestic firms than with local scientific institutions – an important message for domestic economic policy.
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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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Energy Efficient Homes in Germany: Lower Energy Requirement in the East and the South – Results of the ista-IWH-Energy-Efficiency-Index 2007
Claus Michelsen
Wirtschaft im Wandel,
No. 9,
2009
Abstract
At the latest since the oil crisis in the beginning of the 1970s, energy efficiency of homes became a widely discussed topic. In the past, it were in first line aspects of the scarcity of fossil energy sources that motivated the debate. Nowadays, climate protection is a main goal of the European energy policy. For this purpose, a new instrument was introduced in 2009. Europe-wide, the “Energy Performance Certificate” for buildings presents detailed information on the required energy for heating, warm water and (indirectly) the resulting costs for tenants. This instrument is designed to provide further information for consumers to influence their behavior in favor of energy efficient buildings.
Until now, there is only little information on spatial aspects of the energy efficiency of housing in Germany. This article presents data on the level of Germany’s NUTS2 regions. In our calculations, we include information on more than 2.6 million flats, interpolating it representatively for the total stock of multifamily buildings and considering the regional climate.
The results of the first ista-IWH-Energy-Efficiency-Index indicate large differences between regions. The required energy for housing is much lower in the eastern and southern parts of Germany, compared to the western or northern parts. Explanations can be seen in a different structure of the housing stock (e.g. age of construction, level of refurbishment). Moreover, first analyses of the market structure indicate that owner occupied flats are more efficient in energy requirement than rental flats. Vacancy rates, the duration of occupation of rented flats and the level of regional income play an additional role for the energy efficiency of the regional housing stock.
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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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Die Wende in Mitteleuropa aus Sicht wirtschaftswissenschaftlicher Schulen
Ulrich Blum
Ein anderes Europa: Innovation – Anstöße – Tradition in Mittel- und Osteuropa,
2008
Abstract
The contribution inquires into the ability of different schools of economic thought to explain the decline, the transition and the later rise of the reform countries of Central and Eastern Europe. It shows that none of these disciplines, be they old or new institution economics or be they functionalist or structural schools, can provide a satisfactory complete explanation for decline and reconstruction. A consistent explanation rests on a transaction-cost approach extended to information economics. It sees false adaptations of institutions in the technological sense and with respect to incentive structures as main problems.
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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.
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Culture as a Base for Efficient Economic Systems
Ulrich Blum
Wirtschaft im Wandel,
No. 2,
2008
Abstract
Globalization puts the German economic model, the so-called social market economy, under pressure. Constituting elements of this model are fundamental social and economic values. Globalization puts some of these values under pressure and creates inefficiencies because the costs of running the social and economic fabric rise. This is an important justification to inquire into the normative foundations of economic efficiency The following article discusses to what extent culture is a base for efficient economic systems. Information theory is regarded as a key element for explaining social change. The arguments are based on institutional economics with a special view on transaction costs and on cooperation structures. It is shown that specific information technologies promote forms of cooperation, which influence institutional arrangements. The related information technologies themselves are part of the cultural system and its value structures. As a consequence, competition among economic systems favours certain combinations of technologies, cultural arrangements and economic systems. In as much as cultural competition precedes economic competition in the sense of a certain way of thinking, the cultural system can be regarded as a strategic competitive parameter for an economy.
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Optimizing knowledge transfer by new employees in companies
Sidonia vonLedebur
Knowledge Management Research and Practice,
No. 4,
2007
Abstract
Companies realize innovations by creating and implementing new knowledge. One possible source of innovative ideas are new employees. Based on an existing game-theoretic model the conditions of efficient knowledge transfer in a team are analyzed. Offering knowledge to a colleague cannot be controlled directly by the company due to information asymmetries. Thus the management has to provide incentives, which motivate the employees to act in favor of the company. The aim of this paper is to show what influences the propensity of the employees to engage in knowledge transfer and how the management can design the incentive structure for optimal transfer. Several factors are relevant, especially the individual costs of participating in the transfer. These consist mainly of the existing absorptive capacity and the working atmosphere. The model is at least partly generalized on more players. The relevance of the adequate team size is shown: too few or too many developers decrease the remaining company profit. A further result is that depending on the cost structure, perfect knowledge transfer is not always best for the profit of the company.
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Unternehmensbewertung, Rating und Risikobewältigung
Ulrich Blum, Werner Gleißner
Wissenschaftliche Zeitschrift der Technischen Universität Dresden,
2006
Abstract
We inquire into the possibilities to improve the stability of the firms by better managing risk. We propose to directly link risk management to rating, i.e. the ability to meet future financial obligations. Principal elements of rating methodology are discussed against the background of risk management. Next to the rating mark the risk-related requirements for equity become the central measure for risk. Firms must balance the costs of improving their rating against the gains of an improved rating. Risk management is a major driver to improve shareholder value. Risk aggregation is the dominant method that uses information from risk management and synthesizes unique measure of value.
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Network investment and the threat of regulation: avoiding monopoly or infrastructure extension
Christian Growitsch, Niels Krap
Wirtschaft im Wandel,
No. 5,
2006
Abstract
In summer 2005, Deutsche Telekom announced its plans for the buildup of a new fiber glass network. At the same time, it formulated the condition that this network was not to be regulated concerning pricing or use by other providers (network access). In order to make this investment possible, in its coalition treaty the big coalition agreed to exclude the new network from the ex-ante regulation and to include this freedom from regulation in the telecommunication law. The question is now how investments can be facilitated and, at the same time, welfare losses through monopoly gains can be avoided. Applying game theory, it can be shown that a regulation authority like the ‘Bundesnetzagentur’, which is responsible for German telecommunication sector, should signal an increasing tolerance for deviations from its calculated and determined regulatory price in the face of increasing uncertainty concerning expected cost and returns. Thus, the threat of regulation alone leads to tolerable prices, without the actual regulation taking place. In the future, the ‘Bundesnetzagentur’ should reduce information asymmetries and the optimal level of tolerance in order to achieve a more precise intervention price and a more effective threat of regulation. The effectiveness of such a threat decreases if the legislation prevents the regulation authority from using this instrument by law. Against this background, the recent Federal Government resolution from March 17th 2006 noveling the telecommunication law heads for the economically right direction but it has to prove its incentive compatibility in the daily legal practice.
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