The Potentials for Technology Transfer via Foreign Direct Investement in Central and East Europe - Results of a Field Study
Judit Hamar, Johannes Stephan
East-West Journal of Economics and Business,
1 & 2
2005
Abstract
Foreign direct investment plays a particularly crucial role for the processes of technological catch-up in Central East Europe. Whilst most countries of this region have received considerable direct investments, the composition of kinds of subsidiaries is different between countries and hence will the prospects for intense technology transfer also differ between countries. This contribution aims to compare the potentials for internal and external technology transfer across countries of Central East Europe by analysing the management-relationship between subsidiaries and their parents and the market-relationships between subsidiaries and their host economy. For this, a firm-level database of some 458 subsidiaries in Estonia, Poland, the Slovak Republic, Hungary, and Slovenia is analysed empirically.
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The coalition treaty from a fiscal point of view
Kristina vanDeuverden
Wirtschaft im Wandel,
No. 12,
2005
Abstract
After weeks of negotiations the coalition finally agreed on the conditions for their political work. Not surprisingly, the coalition agreement is complex and intransparent – with a multitude of single measures far away from a precise definition. Quantifying the programme and estimating resulting cash flows is currently difficult; official calculations are – if at all – only partly available. Anyhow, the contract will form the basis for economic policy during the next four years; therefore its evaluation by now is indispensable. The thin red line of the agreement – not astonishingly when considering the precarious financial situation of the public sector – is consolidation. However, more than 80% of the consolidation volume results from the revenue side. Though one third of this is due to the cutback of tax exemptions, the lion’s share comes from raising tax rates, mainly the VAT standard rate. In contrast, cutting back public expenditure is minor and the agreement clearly comes short of the Koch/Steinbrück proposal; even new tax reliefs are created. The consolidation is almost completely borne by private households. Enterprises as a whole are barely hit. However, they have to wait until 2008 for a reform of company taxation – one of the most pressing problems in this legislative period. To reduce the companies tax burden until the reform starts the conditions for tax depreciation are temporarily relaxed. Anyway, from an international point of view the statutory tax rate is an important signal to enterprises deciding where to invest. Lowering effective tax rates by changing depreciation conditions is intransparent and, thus, will be less effective. Furthermore savings within the public sector are planned to accomplish consolidation; 10 billion Euro should result from efficiency gains and reduced expenditure. Consolidation measures mainly focus on the budget of the federal government. However, Länder and communities will participate in the additional tax revenues. In contrast, social securities will loose – and therefore also the share of employment that is subject to social insurance contribution. Particularly the unemployment insurance will be burdened by the decrease of its premium rate. Besides, the federal government will reduce its grants to the pension funds and most notably the health system. The contract is dominated by fiscal constraints. Cyclical requirements are considered only cursory and pressing structural reforms are put off. The reforms of company’s taxation, of fiscal federalism, of the health system as well as a proceeding reform of the labour market are only proposed. How and when measures in these fields are realised will determine whether fiscal policy can set a new course.
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East-West internal migration: remarkable loss of human capital
Lutz Schneider
Wirtschaft im Wandel,
No. 10,
2005
Abstract
Ende der 90er Jahre mußte für Ostdeutschland eine negative Trendumkehr in den Wanderungsbewegungen konstatiert werden: Die in den Jahren nach der deutschen Einigung gesunkenen Wanderungsverluste stiegen bis ins Jahr 2001 wieder erheblich an. Zwar ist das Defizit seither erneut rückläufig, dessen Niveau ist mit über 50 000 pro Jahr aber immer noch beträchtlich. Dies gilt umso mehr, als – wie der vorliegende Beitrag zeigt – der Großteil der Abwanderung im Alter von 18-30 Jahren stattfindet, vorwiegend Personen mit überdurchschnittlicher schulischer Bildung betrifft und häufig zu Ausbildungsbeginn oder zum Berufsstart erfolgt. Da andererseits die Zuwanderung seit Jahren auf annähernd gleichem Niveau verharrt und sich in der Bildungsstruktur nicht wesentlich von der Abwanderung unterscheidet, entsteht in der Folge ein Humankapitalverlust, der sowohl Facharbeiter als auch Akademiker betrifft. Weil Westdeutsche überdies vergleichsweise selten in den Osten ziehen, um eine Ausbildung zu beginnen bzw. die berufliche Karriere zu starten, ergibt sich für diese Kategorie ein besonders deutliches Defizit, was negative Konsequenzen vor allem für das zukünftige Potential an Mittel- und Hochqualifizierten in den neuen Bundesländern haben dürfte.
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How do multinationals meet investment decisions: The case study of General Motors
Diemo Dietrich, Daniel Höwer
Wirtschaft im Wandel,
No. 10,
2005
Abstract
The recent events around Opel, the German subsidiary of General Motors, has attracted a great deal of attention, especially with respect to the influence of multinational corporations on the German economy. General Motors' announcement of an internal competition for production capacities in June 2004 has led some observers to the assessment that this would be a step towards more efficiency and profitability. But such internal competition for ressources may be hampered and end up in inefficiency. This is because informational frictions and enforcement problems within a corporation restrict the headquarters ability and willingness to allocate ressources efficiently. Against this background, we discuss possible problems associated with the internal capital allocation within multinational corporations and show their relevance in the case of General Motors.
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Distance and International Banking
Claudia M. Buch
Review of International Economics,
No. 4,
2005
Abstract
This paper asks how important distance is as a determinant of international banking and whether distance has become less important over time. If technological progress has lowered information costs and if information costs increase in distance, the importance of distance should have declined. I use data on assets and liabilities of commercial banks from five countries (France, Germany, Italy, UK, and US) in 50 host countries for the years 1983–99 to test this hypothesis. Generally, I find that banks hold significantly lower assets in distant markets and that the importance of distance for the foreign asset holdings of banks has not changed.
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Financial Openness and Business Cycle Volatility
Claudia M. Buch, Jörg Döpke, C. Pierdzioch
Journal of International Money and Finance,
No. 5,
2005
Abstract
This paper discusses whether the integration of international financial markets affects business cycle volatility. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock. Empirical evidence supports this conclusion. Our results also show that the link between business cycle volatility and financial openness has not been stable over time.
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Monetary Policy and Bank Lending in Japan: An Agency-based Approach
Diemo Dietrich
Incentives and Economic Behaviour,
2005
Abstract
This paper studies the incentive effects on Japanese banks of a low interest rate policy by the Bank of Japan. It utilizes a simplified version of an overlapping principal-agent-style model of corporate finance originally developed in Dietrich (2003). This model is dedicated to study the monetary policy transmission mechanism by combining arguments of the broad credit channel and the bank lending channel taking into account that banks need to be provided with incentives to monitor entrepreneurs. We argue that stipulating banks to possess some amount of own capital generate these incentives. We denote this capital requirement to be market based and show that this requirement depends crucially on interest rates. After revealing some shortcomings of the credit crunch hypothesis, we apply this approach to the Japanese economy. As a result, a policy of very low interest rates may not only be inefficient but counterproductive to reactivate a stumbled economy via the usual credit channel.
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Bank Market Discipline
Reint E. Gropp, M. Schleicher
ECB Monthly Bulletin,
2005
Abstract
This article reviews the conceptual issues surrounding market discipline for banks and describes to what extent market discipline could complement supervisory activities. The potential of market discipline has been explicitly recognised in the New Basel Accord. In addition to capital requirements (Pillar I) and supervisory review (Pillar II), the Accord provides for a greater role of financial markets in complementing traditional supervisory activities by asking banks for increased transparency with regard to their operations (Pillar III). This article puts Pillar III in the broader context of direct and indirect market discipline. It is argued that both direct and indirect market discipline should be enhanced by the transparency requirements of the New Capital Accord, but that other conditions may also need to be met in order for market discipline to become more effective. Nevertheless, the article also shows that aggregated market prices can play a useful role in monitoring banking sector stability.
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Determinants and Effects of Foreign Direct Investment: Evidence from German Firm-Level Data
Claudia M. Buch, J. Kleinert, A. Lipponer
Economic Policy,
No. 41,
2005
Abstract
Foreign direct investment is an essential aspect of ‘globalization’ yet its empirical determinants are not well understood. What we do know is based either on poor data for a wide range of nations, or good data for the US and Swedish cases. In this paper, we provide evidence on the determinants of the activities of German multinational firms by using a newly available firm-level data set from the Deutsche Bundesbank. The specific goal of this paper is to demonstrate the relative role of country-level and firm-level determinants of foreign direct investment. We focus on three main questions: First, what are the main driving forces of German firms’ multinational activities? Second, is there evidence that sector-level and firm-level factors shape internationalization patterns? Third, is there evidence of agglomeration effects in the foreign activities of German firms? We find that the market access motive for internationalization dominates. Firms move abroad mainly to gain better access to large foreign markets. Cost-saving motives, however, are important for some manufacturing sectors. Our results strongly suggest that firm-level heterogeneity has an important influence on internationalization patterns – as stressed by recent models of international trade. We also find positive agglomeration effects for the activities of German firms that stem from the number of other German firms that are active on a given foreign market. In terms of lessons for economic policy, our results show that lowering barriers to the integration of markets and encouraging the formation of human capital can promote the activities of multinational firms. However, our results related to the heterogeneity of firms and agglomeration tendencies show that it might be difficult to fine-tune policies directed at the exploitation of synergies and at the creation of clusters of foreign firms.
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Cross-border Banking and Transmission Mechanisms in Europe: Evidence from German Data
Claudia M. Buch
Applied Financial Economics,
No. 16,
2004
Abstract
International activities of commercial banks play a potential role for the transmission of shocks across countries. This paper presents stylized facts of the integration of European banking markets and analyses the potential of banks to transmit shocks across countries. Although the openness of banking systems has increased, bilateral financial linkages among EU countries are relatively small. The exceptions are claims of German banks on a number of smaller countries. These data are used for an analysis of the determinants of cross-border lending patterns.
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