Skill Content of Intra-european Trade Flows
Götz Zeddies
European Journal of Comparative Economics,
No. 1,
2013
Abstract
In recent decades, the international division of labor has expanded rapidly in the wake of European integration. In this context, especially Western European high-wage countries should have specialized on (human-)capital intensively manufactured goods and should have increasingly sourced labor-intensively manufactured goods, especially parts and components, from Eastern European low wage countries. Since this should be beneficial for the high-skilled and harmful to the lower-qualified workforce in high-wage countries, the opening up of Eastern Europe is often considered as a vital reason for increasing unemployment of the lower-qualified in Western Europe. This paper addresses this issue by analyzing the skill content of Western European countries’ bilateral trade using input-output techniques in order to evaluate possible effects of international trade on labor demand. Thereby, differences in factor inputs and production technologies have been considered, allowing for vertical product differentiation. In this case, skill content of bilateral exports and imports partially differs substantially, especially in bilateral trade between Western and Eastern European countries. According to the results, East-West trade should be harmful particularly to the medium-skilled in Western European countries.
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Financial Factors in Macroeconometric Models
Sebastian Giesen
Volkswirtschaft, Ökonomie,
2013
Abstract
The important role of credit has long been identified as a key factor for economic development (see e.g. Wicksell (1898), Keynes (1931), Fisher (1933) and Minsky (1957, 1964)). Even before the financial crisis most researchers and policy makers agreed that financial frictions play an important role for business cycles and that financial turmoils can result in severe economic downturns (see e.g. Mishkin (1978), Bernanke (1981, 1983), Diamond (1984), Calomiris (1993) and Bernanke and Gertler (1995)). However, in practice researchers and policy makers mostly used simplified models for forecasting and simulation purposes. They often neglected the impact of financial frictions and emphasized other non financial market frictions when analyzing business cycle fluctuations (prominent exceptions include Kiyotaki and Moore (1997), Bernanke, Gertler, and Gilchrist (1999) and Christiano, Motto, and Rostagno (2010)). This has been due to the fact that most economic downturns did not seem to be closely related to financial market failures (see Eichenbaum (2011)). The outbreak of the subprime crises ― which caused panic in financial markets and led to the default of Lehman Brothers in September 2008 ― then led to a reconsideration of such macroeconomic frameworks (see Caballero (2010) and Trichet (2011)). To address the economic debate from a new perspective, it is therefore necessary to integrate the relevant frictions which help to explain what we have experienced during recent years.
In this thesis, I analyze different ways to incorporate relevant frictions and financial variables in macroeconometric models. I discuss the potential consequences for standard statistical inference and macroeconomic policy. I cover three different aspects in this work. Each aspect presents an idea in a self-contained unit. The following paragraphs present more detail on the main topics covered.
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European Integration and National Labor Markets - On the Factor Content of Intra-European Trade Flows
Götz Zeddies
European Journal of Comparative Economics,
2012
Abstract
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The Synchronization of Wage Dynamics across EMU Members: A Test of the Endogeneity Hypothesis
Herbert S. Buscher, Hubert Gabrisch
Empirica,
No. 3,
2012
Abstract
We test the hypothesis of an endogenous currency area for the labor market of the Euro area: has the introduction of a common currency caused wage dynamics to become more synchronized and to be able to cushion for asymmetric shocks? Trade intensity, sector specialization and financial integration are tested for being the driving forces for the endogenous synchronization of wage dynamics. We use regression techniques with instrument variables, and find evidence of persistent asymmetries in nominal wage formation, despite a single currency and monetary policy. We explain the result with more specialization following financial integration, and with still existing differences in wage formation and labor market institutions. We conclude that the euro zone is not endogenous with respect to wage formation. Rather, there are incentives for beggar-thy-neighbor policies in the Euro area.
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International Trade Patterns and Labour Markets – An Empirical Analysis for EU Member States
Götz Zeddies
International Journal of Economics and Business Research,
2012
Abstract
During the last decades, international trade flows of the industrialized countries became more and more intra-industry. At the same time, employment perspectives particularly of the low-skilled by tendency deteriorated in these countries. This phenomenon is often traced back to the fact that intra-industry trade (IIT), which should theoretically involve low labour market adjustment, became increasingly vertical in nature. Against this background, the present paper investigates the relationship between international trade patterns and selected labour market indicators in European countries. As the results show, neither inter- nor vertical intra-industry trade (VIIT) do have a verifiable effect on wage spread in EU member states. As far as structural unemployment is concerned, the latter increases only with the degree of countries’ specialization on capital intensively manufactured products in inter-industry trade relations. Only for unemployment of the less-skilled, a slightly significant impact of superior VIIT seems to exist.
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International Fragmentation of Production and the Labour Input into Germany’s Exports – An Input-Output-analysis
Hans-Ulrich Brautzsch, Udo Ludwig
IWH Discussion Papers,
No. 14,
2011
Abstract
The import penetration of exports has become a topic of public debate, particularly in the context of Germany’s position as one of the world’s leading exporters. The growth in the volume of intermediate products purchased from abroad for subsequent processing into export goods in Germany seems to be undermining the importance of exports as a driver of domestic production and employment. The gains that arise from an increase in exports seem to have been offset by the losses caused by the crowding out of local production by imports. Empirical evidence on the impact of this international integration of the goods market on the German labour market is ambiguous. Short-term negative effects on employment are claimed to be offset by the long-term benefit that the jobs lost in the short run will eventually be replaced by higher-skilled jobs with better
perspectives. Against this background, the following hypothesis is tested empirically: Germany is poor in natural resources, but rich in skilled labour. In line with the Heckscher- Ohlin theory, Germany should therefore specialize in the production of export goods and services that are relatively intensive in these factors and should import those goods and services that are relatively intensive in unskilled labour. The empirical part of the paper deals with the extent of the German export penetration by imports. At first, it analyses by what ways imports are affecting the exports directly and indirectly and shows the consequences of import penetration of exports for the national output and employment. Secondly, consequences for employment are split in different skill types of labour. These issues are discussed with the standard open static inputoutput- model. The data base is a time series of official input-output tables. The employment effects for Germany divided by skill types of labour are investigated using skill matrices generated by the authors.
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Stock Market-Induced Currency Crises: A New Type of Twins
Stefan Eichler, Dominik Maltritz
Review of Development Economics,
No. 2,
2011
Abstract
This paper explores the link between currency crises and the stock market in emerging economies. By integrating foreign stock market investors in a currency crisis model, we reveal a new fundamental inconsistency as a potential crisis trigger: since emerging economies' stock markets often have high returns, whereas central bank reserves grow slowly or decline, the amount of reserves foreign investors can deplete when selling their stocks and repatriating the proceeds grows over time and is considerably higher than funds that have been invested in the stock market. Capital withdrawals of foreign stock market investors can trigger currency crises by depleting central bank reserves, particularly in successful countries with booming stock markets and large foreign investment.
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Investment Grants: Which Requirements Should be Fulfilled?
Mirko Titze, Lutz Schneider
Wirtschaft im Wandel,
No. 11,
2010
Abstract
Since the year 1969 the German government has applied investment grants to improve regional economic development of disadvantaged regions. The support of eligible firms shall enhance its investment activities. Such activities may force a sustainable development of the respective region. One requirement – amongst others – for the grant of this investment support scheme is the firm’s verification of supra-regional sales. The gains resulting from the firms’ export activities lead to additional income for that region, and this stimulates multiplicative (reinforcing) regional income processes. Since the German reunification this instrument has been applied in the new federal states, too. Due to the fact that structural deficits still exist in East Germany investment grants are adopted primarily in the new federal states. Today, some policy decision makers think that the catching-up process of disadvantaged regions is not fast enough. Against this background, the further application of investment grants is discussed controversially. Some criticism tends to the criterion of supra-regional sales. It has been argued that particularly small firms are excluded from this support scheme. However, small firms are considered as key players for regional economic activities. Moreover, firms which are highly integrated in international markets depend on world trade cycles and that might be risky for the respective region. Finally, critics believe that regional actors should be boosted in order to strengthen regional identities in terms of regional buyer-supplier-networks. This article shows that policy decision makers should maintain the criterion of supra-regional sales. Particularly, regions with a loss of inhabitants need gains from supra-regional sales to stabilise their local purchasing power. Otherwise, these regions are strongly dependent on transfer flows stemming from other regions. Beyond that, supra-regional sales indicate the firm’s international competitiveness. Finally, the most important argument for supra-regional sale might be linkages to supra-regional knowledge flows which strongly affect the region’s innovative capabilities.
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State Aid in the Enlarged European Union. An Overview
Jens Hölscher, Nicole Nulsch, Johannes Stephan
Abstract
In the early phase of transition that started with the 1990s, Central and Eastern European Countries pursued economic restructuring of the enterprise sector that involved massive injections of state support. Also foreign investment from the West and facilitation of the development of a market economy involved massive injections of state support. With their accession to the European Union (EU), levels and forms of state aid came under critical review by the European Commission. This inquiry investigates whether the integration of the new member states operates on a level playing field with respect to state aid. Quantitative and qualitative analysis is relied upon to answer this key, as well as other, related questions. Findings suggest that in recent years a level playing field across the EU has indeed emerged. State aid in the new EU member countries is rather handled more strictly than laxer compared to the ‘old’ EU countries.
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