Size, Productivity, and International Banking
Claudia M. Buch, C. T. Koch, Michael Koetter
Journal of International Economics,
No. 2,
2011
Abstract
Heterogeneity in size and productivity is central to models that explain which manufacturing firms export. This study presents descriptive evidence on similar heterogeneity among international banks as financial services providers. A novel and detailed bank-level data set reveals the volume and mode of international activities for all German banks. Only a few, large banks have a commercial presence abroad, consistent with the size pecking order documented for manufacturing firms. However, the relationship between internationalization and productivity also yields two inconsistencies with recent trade models. First, virtually all banks hold at least some foreign assets, irrespective of size or productivity. Second, some fairly unproductive banks maintain commercial presences abroad.
Read article
Optimum Currency Areas in Emerging Market Regions: Evidence Based on the Symmetry of Economic Shocks
Stefan Eichler, Alexander Karmann
Open Economies Review,
No. 5,
2011
Abstract
This paper examines which emerging market regions form optimum currency areas (OCAs) by assessing the symmetry of macroeconomic shocks. We extend the output-prices-VAR framework by adding net exports and the real effective exchange rate as endogenous variables. Based on theoretical considerations, we derive which shocks affect these variables in the long run: shocks to labor productivity, foreign trade, labor supply, and money supply. The considered economies of Central and Eastern Europe, the Commonwealth of Independent States, East and Southeast Asia, and South Asia, exhibit large enough shock symmetry to form a currency union; the economies of Africa, Latin America, and the Middle East do not.
Read article
Size is not everything – The efficiency of municipal service provision in Saxony-Anhalt
Peter Haug, Annette Illy
Wirtschaft im Wandel,
No. 10,
2011
Abstract
The proponents of municipal area reforms – e.g. the recently completed reform in Saxony-Anhalt – expect that municipal amalgamations or centralized organizational forms save costs or increase the efficiency of local public service provision. This article examines the potential efficiency deficits of Saxony-Anhalt´s fragmented municipal structures on the eve of the crucial phase of the municipal reform. The results of a two-step DEA bootstrap procedure show that decentralized municipalities (“Verwaltungsgemeinschaften”) do not have to be significantly less efficient than centralized municipalities (“Einheitsgemeinden”). Furthermore, the results of the scale efficiency analysis suggest that the majority of Saxony-Anhalt´s communities already had an approximately efficient “firm size” – if the aggregated level of the municipal associations is examined. The relationship between scale efficiency and population is U-shaped. On the one hand, the results do not support the preservation of micro-municipalities or the formation of municipal associations with more than ten members. On the other hand, the results provide also no evidence for the necessity to reduce the number of towns and municipalities in Saxony-Anhalt from 1118 in 2004 to currently 219 – even if the looming population decline is taken into account.
Read article
Labor Demand During the Crisis: What Happened in Germany?
Claudia M. Buch
IZA. Discussion Paper No. 6074,
2011
Abstract
In Germany, the employment response to the post-2007 crisis has been muted compared to other industrialized countries. Despite a large drop in output, employment has hardly changed. In this paper, we analyze the determinants of German firms’ labor demand during the crisis using a firm-level panel dataset. Our analysis proceeds in two steps. First, we estimate a dynamic labor demand function for the years 2000-2009 accounting for the degree of working time flexibility and the presence of works councils. Second, on the basis of these
estimates, we use the difference between predicted and actual employment as a measure of labor hoarding as the dependent variable in a cross-sectional regression for 2009. Apart from total labor hoarding, we also look at the determinants of subsidized labor hoarding through short-time work. The structural characteristics of firms using these channels of adjustment differ. Product market competition has a negative impact on total labor hoarding but a positive effect on the use of short-time work. Firm covered by collective agreements hoard less labor overall; firms without financial frictions use short-time work less intensively.
Read article
The Role of Investment Banking for the German Economy: Final Report for Deutsche Bank AG, Frankfurt/Main
Michael Schröder, M. Borell, Reint E. Gropp, Z. Iliewa, L. Jaroszek, G. Lang, S. Schmidt, K. Trela
ZEW-Dokumentationen, Nr. 12-01,
No. 1,
2011
Abstract
The aim of this study is to assess the contributions of investment banking to the economy with a particular focus on the German economy. To this end we analyse both the economic benefits and the costs stemming from investment banking.
The study focuses on investment banks as this part of banking is particularly relevant for financing companies as well as the development and use of specific products to support the needs of private and professional clients. The assessment of benefits and costs of investment banking has been conducted from a European perspective. Nevertheless there is a focus on the German economy to allow a more detailed analysis of certain aspects as for example the use of derivatives by German companies, the success of M&As in Germany or the effect of securitization on loan supply and GDP in Germany. For comparison purposes other European countries and also the U.S. have been taken into account.
The last financial crisis has shown the negative impacts of banks on the financial system and the whole economy. In a study on the contribution of investment banks to systemic risk we quantify the negative side of the investment banking business.
In the last part of the study we assess how the effects of regulatory changes on investment banking. All important changes in banking and capital market regulation are taken into account such as Basel III, additional capital requirements for systemically important financial institutions, regulation of OTC derivatives and specific taxes.
Read article
Related Variety, Unrelated Variety and Regional Functions: Identifying Sources of Regional Employment Growth in Germany from 2003 to 2008
Matthias Brachert, Alexander Kubis, Mirko Titze
Abstract
This article analyses how regional employment growth in Germany is affected by related variety, unrelated variety and the functions a region performs in the production process. Following the related variety literature, we argue that regions benefit from the existence of related activities that facilitate economic development. However, we argue that the sole reliance of related variety on standard industrial classifications remains debatable. Hence, we offer estimations for establishing that conceptual progress can indeed be made when a focus for analysis goes beyond solely considering industries. We develop an industry-function based approach of related and unrelated variety. Our findings suggest that related variety only in combination with a high functional specialization
of the region facilitates regional growth in Germany. Additionally, also unrelated
variety per se fails to wield influences affecting development of regions. It is rather unrelated, but functionally proximate variety in the groups “White Collar” and “Blue Collar Workers” positively affects regional employment growth.
Read article
Services strengthen macroeconomic relevance of manufacturing industry
Udo Ludwig, Hans-Ulrich Brautzsch, Brigitte Loose
Wirtschaftsdienst,
2011
Abstract
In line with the hypothesis that in the course of real income growth the structure of value added and employment shifts from the primary to the secondary to the tertiary sector of production the relevance of manufacturing industry shrinks. For Germany this secular trend was confirmed for all decades beginning with the year 1970. In this paper, however, the manufactured final products are the starting point of the analysis. Using the input-output method here, it is shown that as a result of the increasing interdependence between the service sector and manufacturing industry the manufactured final products absorb a growing share of the total value added.
Read article
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.
Read article
Did the Crisis Affect Potential Output?
Makram El-Shagi
Applied Economics Letters,
No. 8,
2011
Abstract
Conventional Phillips-curve models that are used to estimate the output gap detect a substantial decline in potential output due to the present crisis. Using a multivariate state space model, we show that this result does not hold if the long run role of excess liquidity (that we estimate endogeneously) for inflation is taken into account.
Read article