German Economic Growth in 2008: Temporary Slow Down
Wirtschaft im Wandel,
No. 4,
2008
Abstract
World economic growth has slowed in the first months of 2008. The main causes are the crisis in the US housing sector and the turmoil in the financial sector in general, the spreading expectation of a recession in the US, and sharply rising prices for energy and food. The German economy, though, is still expanding healthily, with strong investment and export activities. Private consumption, however, shrank at the end of 2007. In 2008, while favorable labor market conditions will improve job security and thus the propensity to consume, real incomes will not rise by much due to the risen inflation rate; consumption will again expand only modestly this year. A slower expansion of the world economy and the stronger euro will dampen exports and investment. All in all, growth will slow to (working-day adjusted) 1.2% in 2008. Chances are good that in the next year, after the negative shocks have faded out a bit, growth will be accelerating again. The East German Economy was on a lower growth path in 2006 and 2007 than the economy in the West, according to recently revised national accounts data. Industrial production, however, is more dynamic in the East. Unemployment rates will continue to decrease faster in the East: as in the rest of Germany, employment is growing, and, contrary to what happens in the West, the labor force is shrinking.
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Optimismus – Robuster Mittelstand
Udo Ludwig
Unternehmermagazin,
No. 3,
2008
Abstract
Der Mittelstand hat den Restrukturierungsprozess in den Jahren nach dem Platzen der Aktienblase mit Gewinn bewältigt, hat aber im Unterschied zu den Großunternehmen zur Erhaltung des Beschäftigungsstandes beigetragen. Trotz unterdurchschnittlicher Gewinnentwicklung investiert er erheblich. Er kann Deutschland durch die derzeitigen Gefahren von den internationalen Finanzmärkten tragen.
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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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Globalisierung und Beschäftigung – eine Untersuchung mit der Input-Output-Methode.
Udo Ludwig, Hans-Ulrich Brautzsch
IMK Studies Nr. 1/2008,
No. 1,
2008
Abstract
In the course of globalization imports play a more and more important role as inputs for national production. In the wake of this development, domestic products are substituted by imported goods and jobs are moved abroad. However, this enables domestic companies to become more competitive and to improve their position in national and international markets. Applying input-output techniques this paper shows that, although imports have risen considerably, the increase in domestic production induced by exports had an overall positive impact on the German economy. This holds not only for the trade balance of production sectors that are oriented to export activities, but for the trade balance as a whole. Overall, high export surpluses were accompanied by increases in value added. Furthermore, especially in the second half of the last decade employment benefited much; while the rising import of intermediate and finished goods has caused many job cuts, on balance the increase in employment in the wake of the strong export expansion has outdone the losses.
Even though many industrialized economies in Europe have made similar experiences, the impacts on job markets differed considerably. For example, while the strength of the increase in employment in the Netherlands was similarly to that in Germany, labour market improvements in France were much weaker, not least due to noticeably lower export surpluses.
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Determinants of Female Migration – The Case of German NUTS 3 Regions
Alexander Kubis, Lutz Schneider
IWH Discussion Papers,
No. 12,
2007
Abstract
Our study examines the regional patterns and determinants of migration flows of young women. At the NUTS-3 regional level, i.e. the district level (Kreise), the German internal migration flows of the year 2005 are explored. From descriptive statistics it can be seen that peripheral regions in East Germany face the strongest migration deficit with respect to young women, whereas agglomerations in West Germany but also in the East benefit from an intense migration surplus within this group. An econometric analysis of determinants of regional migration flows gives evidence of the importance of labour market, family-related and educational migration motives. Generally speaking, young women tend to choose regions with good income and job opportunities, in addition they seem to be attracted by regions enabling an appropriate balance between family and career. Furthermore the existence of excellent educational facilities is a significant influence for young women’s migration. This educationally motivated type of migration generates a long lasting effect on the regional migration balance, especially when the educational opportunities in the destination region are associated with adequate career perspectives for high qualified female graduates. In view of considerable losses due to migration, the study shows various options for action. An important course of action is to incorporate policy measures improving regional employment and income opportunities. Secondly, extending vocational and academic offers addressed to women seems to be a suitable way to stimulate women’s immigration. Moreover, enhancing the social infrastructure, which contributes to a satisfactory work life balance, might attract young women or at least reduce the number of them leaving a region.
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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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Market Follows Standards
Ulrich Blum
Wirtschaft im Wandel,
No. 10,
2007
Abstract
Standards are an important part of the codified knowledge of a society. In contrast to industry standards, formal standards are created in a consensus-based procedure open to all interested parties. Only if an economic interest for application exists will formal standards be produced. Interested parties have to shoulder participation costs themselves, which enforces economic interest. Up to a certain extent, governments also trigger and finance formal standardisation processes through the new approach, which creates a framework that is filled by private activity. Standards stand at the end of intellectual property rights if the totality of the value chain of knowledge production is looked at. One important aspect is their accessibility and the inclusion of all necessary intellectual property rights, especially patents, at reasonable prices. Conversely, consortia may exclude groups from the use of their standards. By preventing the licensing of those patents included in a standard, they can effectively block market entry. Thus, “successful” standards often face antitrust problems. Formal standards reduce costs of production through economies of scale, economies of scope and network-economies. Goods and processes that are standardized signal quality, the inclusion of high technological standards and permanent presence in the markets, which again accelerates market dissemination. Firms face a dilemma: On the one hand, the penetration of a markets with industry standards offers potentials for high profits; on the other hand, this has to be balanced against the risk of failure, especially if clients are hesitant because they do not know which standard will be successful in the end. Formal standards create and stabilize trust markets. This is especially true in the area of globalisation. Europe, which has to face an enormous competition in the international knowledge economy, needs an institutionally efficient approach to formal standardisation. This contribution addresses future problems of the European standardisation that have been developed within the framework of a working group of the European Standardisation Organisation called Future Landscape of European Standardisation (FLES).
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The Euro and Cross-Border Banking: Evidence from Bilateral Data
S. Blank, Claudia M. Buch
Comparative Economic Studies,
No. 3,
2007
Abstract
Has the introduction of the Euro fostered financial integration in Europe? We answer this question using a data set of banks’ bilateral foreign assets and liabilities provided by the Bank for International Settlements. The data cover the pre-Euro period (1995–1998) and the post-Euro period (1999–2005). We use information from 10 OECD reporting countries and all OECD recipient countries. Gravity regressions show a positive and significant impact of the Euro on bilateral financial linkages. This effect is stronger and more robust for banks’ foreign assets than for their foreign liabilities.
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