Economic Upswing and Vitalization of the Labor Market – Who Gains From the Upswing?
Herbert S. Buscher
Wirtschaft im Wandel,
No. 5,
2008
Abstract
The current situation with respect to the economic development in Germany may be characterized as somewhat suppressed as opposed to euphoric. And this statement holds although the German economy is in an upswing phase since 2005, and the GDP growth rates clearly exceed 2% per annum. The main driving forces of this upswing are mainly from the German exports as well as the domestic investment decisions. Rather underdeveloped compared with the exports and the investment is private consumption. This development is accompanied by positive signals from the German labor market. Declining unemployment figures, increasing regular employment and a smaller number of people in active labor market policy measures are the accompanying positive signals from the labor market. But this in general positive development has not yet reached widespread groups of employees in the sense that their real income has also risen and they thus can dispose of a higher amount of purchasing power. This time lag in the different developments between employment and income may lead to a situation that perceived and actual developments may differ and that actually, there might be a gap between the two. The paper discusses what could be meant with „perceived” development and reaches to the conclusion that actual and perceived developments are not so far away from each other than one might have expected.
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Oil Prices and International Trade: How Petrodollar Recycling Affects the Industrialised Countries
Götz Zeddies
Wirtschaft im Wandel,
No. 4,
2008
Abstract
Since 2004, prices for crude oil nearly tripled at international commodity markets. In the wake of the oil crises of the 1970s and ‘80s, numerous empirical studies analysing the macroeconomic effects of sharp increases in commodity prices were carried out pointing at the risks of oil price rises for GDP growth in oil-importing countries. However, in most of these analyses, the impact of oil price increases on international trade of oil-importing countries, which gained in importance in the course of globalisation, is considered only marginally. This is especially the case for the additional revenues of oil-exporting countries spent in large parts for imports from and investment in the industrialised economies.
The present article examines the impact of oil price increases on merchandise exports and imports of single oil-importing industrialised countries. The results show that the curbing effects on merchandise exports are lower than on imports. Whereas import demand responds disproportionally high on the decline in consumption and investment in consequence of oil price increases, the effects on merchandise exports are ambivalent. On the one hand, exports to oil-importing trading partner countries decline due to the local economic downturns, but on the other, exports to oil-exporting countries sharply increase. As a consequence, the negative impact of rising oil prices on macroeconomic activity in oil-importing countries is lowered by the external sector due to growing net exports.
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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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Do Weak Supervisory Systems Encourage Bank Risk-taking?
Claudia M. Buch, G. DeLong
Journal of Financial Stability,
2008
Abstract
Weak bank supervision could give banks the ability to shift risk from themselves to supervisors. We use cross-border bank mergers as a natural experiment to test changes in risk and the impact of supervision. We examine cross-border bank mergers and find that the supervisory structures of the partners’ countries influence changes in post-merger total risk. An acquirer from a country with strong supervision lowers total risk after a cross-border merger. However, total risk increases when the target bank is located in a country with relatively strong supervision. This result is consistent with strong host regulators limiting the risky activities of their local banks. Foreign-owned competitors could then engage in the risky projects, especially if the foreign banks’ supervisors are not strong. An acquirer entering a country with strong supervision appears to shift risk back to its home country. The results suggest that bank supervisors can reduce total banking risk in their countries by being strong.
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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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East German Innovation System attractive for Foreign Investors
Jutta Günther, Björn Jindra, Johannes Stephan
Wirtschaft im Wandel,
No. 1,
2008
Abstract
Foreign direct investment (FDI) plays an important role in the catching-up process of East Germany due to direct employment- and demand related effects. However, this article takes a technological perspective on FDI in East Germany. It considers technological activities of foreign investors (R&D and innovation) and asks to what extent these are integrated into the East German innovation system. In other words, do foreign investors interact technologically with domestic enterprises and scientific institutions? So far, there seems to be a striking absence of empirical evidence on this issue. The basis for our analysis is recent data from a representative survey of foreign direct investors in East German manufacturing completed in 2007. The findings show that on average foreign investors are more R&D and innovation intensive compared to the total of East German manufacturing. In addition, their technological activities are by no means isolated from the East German innovation system. Foreign subsidiaries seem to benefit from East German customers, suppliers and especially scientific institutions with regard to locally conducted R&D and innovation. Contrary to existing assumptions the East German innovation system seems to be particularly attractive for the most technologically active foreign subsidiaries. This could constitute a major locational advantage for FDI in East Germany over Central and East Europe. However, the technologically active foreign investors believe that only East German suppliers are able to benefit from their technological cooperation. The same cannot be said about East German customers or competitors. Thus, the potential for technological externalities from FDI in East Germany seems still to be limited.
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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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New Limits of Municipal Economic Activity: Expansion versus Reduction?
Peter Haug
Wirtschaft im Wandel,
No. 12,
2007
Abstract
On October 11th and 12th 2007, the department of urban economics of the Halle Institute for Economic Research organized a conference on local governments’ entrepreneurial activities. The main target of this second conference after the first one in 2005 was to analyze the spatial and functional boundaries of municipal economic activities. The participants came from various fields of science, local public administrations, municipal enterprises, associations and included politicians and others interested in the topic. The presentations covered a broad variety of subjects. On the first conference day, the speakers dealt with the partly controversial attitude of different disciplines such as law, economics, public business administration or sociology towards the local public economy. Other presenters focused on selected municipal services (public transportation, housing).
The second day was dedicated to the topics restrictions on municipal economic activities in Southern Europe, regional effects of municipal enterprises and employee protection in case of privatization. The conference was closed by a panel discussion with distinguished representatives from politics, science and management about the future role of municipal enterprises.
The presentations and discussions showed that the times are changing for the local public sector. In addition, the participants rejected an unrestricted extension of markets or business fields of municipal enterprises as well as the complete privatization of municipal services.
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Poland: Strong Domestic Demand Will Drive Economic Activity
Martina Kämpfe
Wirtschaft im Wandel,
No. 12,
2007
Abstract
Domestic demand was the main force behind growth in 2007. The high level of both, gross fixed investments of firms and private consumption, led to extended industrial production capacities and increased demand of imports. Extraordinarily high was the demand for the output of construction firms. Rising employment and wages and the continuing expansion of loans to the household sector supported the private consumption growth. The high levels of capacity utilization coincide with shortages of labour. First responses to this were wage hikes, which pushed the unit labour costs and led to some increase in consumer price inflation. In 2008, expansion of economic activity will continue at only some lower level, driven by investments and consumption.
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Reform of Local Municipal Structures: Centralization not only Implicates Advantages
Peter Haug, Claus Michelsen
Wirtschaft im Wandel,
No. 11,
2007
Abstract
The question whether centralized or decentralized municipal structures are more efficient has been discussed, not only in Germany, for a long time primarily under aspects of law and administrative sciences. In this article, we use an economic approach instead. The prevailing theories on interjurisdictional competition are not conclusive about the cost and welfare effects of centralization. Therefore, using the example of Saxony-Anhalt we investigate empirically if there are any significant differences in expenses or personnel between more centralized municipal governance forms (“Einheitsgemeinden”) or rather decentralized forms (“Verwaltungsgemeinschaften”). Our cross-section analysis for selected municipal activities reveals that both types are very similar in their cost and manning structures. Significant differences can be explained rather by different population densities than by the organizational structure. Considering these results we do not recommend a forced amalgamation of the municipalities in Saxony-Anhalt. Especially, if frustration cost or the political transaction cost, which both rise with centralization, are taken into account.
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