Endogenous Institution Formation in Public Good Games: The Effect of Economic Education
Martin Altemeyer-Bartscher, Dmitri Bershadskyy, Philipp Schreck, Florian Timme
IWH Discussion Papers,
No. 29,
2017
Abstract
In a public good experiment, the paper analyses to which extent individuals with economic education behave differently in a second-order dilemma. Second-order dilemmas may arise, when individuals endogenously build up costly institutions that help to overcome a public good problem (first-order dilemma). The specific institution used in the experiment is a communication platform allowing for group communication before the first-order public good game takes place. The experimental results confirm the finding of the literature that economists tend to free ride more intensively in public good games than non-economists. The difference is the strongest in the end-game phase, yielding in the conclusion that the magnitude of the end-game effect depends on the share of economists in the pool of participants. When it comes to the building-up of institutions, the individual efficiency gain of the institution and its inherent cost function constitute the driving forces for the contribution behaviour. Providing an investment friendly environment yields in economists contributing more to the institution than non-economists. Therefore, we make clear that first-order results of a simple public good game cannot be simply applied for second-order incentive problems.
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14.12.2017 • 39/2017
Cyclical upswing in Germany and in the world
At the turn of the year, the cyclical upswing in Germany continues. Gross domestic product is expected to increase by 2.2% in 2017, and because this year has seen significantly fewer working days than before, the rate of change amounts, adjusted for calendar effects, to even 2.5%. “The upswing is broad-based”, says Oliver Holtemöller, head of the Department Macroeconomics and IWH vice president. “For quite a long time now, significant increases in employment have been driving private incomes, consumption and housing construction. The latter was, in addition, stimulated by low interest rates.” Currently, German exports are benefiting from the vivid international economy. Not least since monetary policy in the euro area remains expansionary for the time being, we expect the upturn to continue in 2018 and production to increase again by 2.2%. Consumer price inflation is, with 1.7%, still moderate in both 2017 and 2018. Although domestic price pressures are on the rise, the effects of the energy price increase in 2017 expire in 2018, and the appreciation of the euro in the summer of 2017 will dampen price dynamics.
Oliver Holtemöller
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28.09.2017 • 35/2017
Joint Economic Forecast—Autumn 2017: Upturn Remains Robust—Amid Mounting Tensions
The German economic upturn has gained both in terms of strength and breadth. In addition to consumer spending, external trade and investments are now also contributing to economic expansion. These are the conclusions drawn by the economic research institutes in their autumn report for the German federal government. Whereas the very high economic momentum in the first half of the current year will slow slightly, expansion of economic output this year and next will exceed production capacity growth. As a result, overall capacity utilization will increase, with economic output exceeding potential output. Gross Domestic Product is likely to grow by 1.9 percent this year and by 2 percent in 2018 (calendar-adjusted: 2.2 and 2.1 percent, respectively).
Oliver Holtemöller
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26.09.2017 • 34/2017
Meaningless Work Threatens Employees’ Job Performance
Employees show a significant decline in exerted effort when they are informed about the futility of a task already done. As the results of an experiment conducted by Sabrina Jeworrek from the Halle Institute for Economic Research (IWH) and co-authors show, meaningless work causes anger and disappointment, and can negatively affect employees' later motivation. However, employees seem to “forgive” their employer for cancelling a project if another and still valid purpose is credibly communicated.
Sabrina Jeworrek
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Joint R&D Subsidies, Related Variety, and Regional Innovation
T. Broekel, Matthias Brachert, M. Duschl, T. Brenner
International Regional Science Review,
No. 3,
2017
Abstract
Subsidies for research and development (R&D) are an important tool of public R&D policy, which motivates extensive scientific analyses and evaluations. This article adds to this literature by arguing that the effects of R&D subsidies go beyond the extension of organizations’ monetary resources invested into R&D. It is argued that collaboration induced by subsidized joint R&D projects yield significant effects that are missed in traditional analyses. An empirical study on the level of German labor market regions substantiates this claim, showing that collaborative R&D subsidies impact regions’ innovation growth when providing access to related variety and embedding regions into central positions in cross-regional knowledge networks.
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24.04.2017 • 22/2017
Higher capital requirements: It’s the firms that end up suffering
61 European banks were scheduled to increase their capital cover by 2012 to provide a sufficient buffer for future crises. As the study by the research group chaired by Reint E. Gropp at the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association shows, the banks did implement these requirements – not by raising their levels of equity, but by reducing their credit supply. This resulted in lower firm, investment, and sales growth for firms which obtained a larger share of their bank credit from these banks.
Reint E. Gropp
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12.04.2017 • 19/2017
Joint Economic Forecast Spring 2017: Upturn in Germany strengthens in spite of global economic risks
The German economy is already in the fifth year of a moderate upturn. According to the Gemeinschaftsdiagnose (GD, joint economic forecast) that was prepared by Germany’s five leading economic research institutes on behalf of the Federal Government, capacity utilization is gradually increasing, and aggregate production capacities are now likely to have slightly exceeded their normal utilisation levels. However, cyclical dynamics remain low compared to earlier periods of recoveries, as consumption expenditures, which do not exhibit strong fluctuations, have been the main driving force so far. In addition, net migration increases potential output, counteracting a stronger capacity tightening. “Gross domestic product (GDP) is expected to expand by 1.5% (1.8% adjusted for calendar effects) and 1.8% in the next year. Unemployment is expected to fall to 6.1% in 2016, to 5.7% in 2017 and 5.4% in 2018”, says Oliver Holtemöller, Head of the Department Macroeconomics and vice president of the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association. Inflation is expected to increase markedly over the forecast horizon. After an increase in consumer prices of only 0.5% in 2016, the inflation rate is expected to rise to 1.8% in 2017 and 1.7% in 2018. The public budget surplus will reduce only modestly. Public finances are slightly stimulating economic activity in the current year and are cyclically neutral in the year ahead.
Oliver Holtemöller
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11.04.2017 • 18/2017
The state as a pioneering customer: How public demand can drive private innovation
Especially in technology-intensive industries, demand from the state can expand private markets and create incentives for privately funded research and development, a new study by the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association shows.
Viktor Slavtchev
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05.01.2017 • 3/2017
Secretariat for research network CompNet gets new home at IWH
The Halle Institute for Economic Research (IWH) – Member of the Leibniz Association is pleased to announce that it will be hosting the Secretariat for the Competitiveness Research Network (CompNet), an international network of scholars and practitioners, who share interest for top-notch research and policy analysis on competitiveness and productivity.
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14.12.2016 • 50/2016
The German Economy: Economic Activity Spurred by Private Consumption and Construction
German economic activity remains robust due to strong domestic demand. IWH forecasts gross domestic product (GDP) to increase by 1.3% in 2017. The growth rate is half a percentage point lower than in 2016 due to calendar effects and a negative contribution of external trade. Consumer price inflation also remains modest (1.3%). “Unemployment is expected to increase slightly due to a protracted integration of refugees into the labor market”, says Oliver Holtemöller, Head of the Department Macroeconomics and IWH vice president
Oliver Holtemöller
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