09.08.2017 • 29/2017
Networked and protected
During the financial crisis, billions were spent to rescue banks that were according to their governments too big to be allowed to fail. But a study by Michael Koetter from the Halle Institute for Economic Research (IWH) and co-authors shows that besides the size of the banks, the centrality within the global financial network was also pivotal for financial institutions to receive a bail-out.
Read press release
06.07.2017 • 28/2017
Politicians share responsibility for the risk of their state defaulting
Investors assume higher risks of default when a country is politically unstable or governed by a party at the left or right end of the political spectrum. However, according to findings obtained by Stefan Eichler from the Halle Institute for Economic Research (IWH), the more democratic the country is and the more it is integrated into the global economy, the lower is the impact that such political factors have.
Read press release
When the Meaning of Work Has Disappeared: Experimental Evidence on Employees’ Performance and Emotions
This experiment tests for a causal relationship between the meaning of work and employees’ motivation to perform well. The study builds on an existing employer–employee relationship, adding realism to the ongoing research of task meaning. Owing to an unexpected project cancelation, we are able to study how varying the information provided about the meaning of previously conducted work — without the use of deception, but still maintaining a high level of control — affects subsequent performance. We observe a strong decline in exerted effort when we inform workers about the meaninglessness of a job already done. Our data also suggests that providing a supplemental alternative meaning perfectly compensates for this negative performance effect. Individual characteristics such as reciprocal inclinations and trust prompt different reactions. The data also show that the meaning of work affects workers’ emotions, but we cannot establish a clear relationship between emotional responses and performance.
21.10.2010 • 60/2010
Kerstenetzky Award 2010 für Young Economists
Dipl.-Volkswirtin Katja Drechsel und Dipl.-Volkswirt Rolf Scheufele wurden bei der 30. CIRET-Konferenz vom 13. bis 16. Oktober 2010 in New York für ihre Arbeit zum Thema “Should we trust in Leading Indicators? – Evidence from the Recent Recession” mit dem Isaac Kerstenetzky Award 2010 für Young Economists (Honourable Mention) geehrt. Sie erhalten diese Aus-zeichnung auf Grundlage ihrer Arbeit zur Untersuchung der Prognosegüte von konjunkturellen Frühindikatoren in Deutschland in der Rezession 2008/2009.
Mutual Perception of Science and Industry in Innovation Networks – Evidence from East Germany
D. Dyker (ed.), Network Dynamics in Emerging Regions of Europe, Imperial College Press,
The paper examines how science and industry perceive each other. Cooperation in the field of innovation and research and development has increased in recent years. But comprehensive empirical research on the mutual perception of science and industry is lacking so far. The article presents the results of explorative research based on a number of qualitative interviews with representatives from science and industry on that topic. The interviews were carried out in the Central German Region which is a centre of manufacturing industry especially of chemicals. So the two selected industries are chemical industry (high-tech based) and food processing (low-tech based). The paper provides remarks on the German innovation system. The empirical section summarizes the interview reports. We found only little evidence of conflict of interests between market-oriented industry and science organisations. Cooperation exists and works. The key issue is trust.
Should We Trust in Leading Indicators? Evidence from the Recent Recession
IWH Discussion Papers,
The paper analyzes leading indicators for GDP and industrial production in Germany. We focus on the performance of single and pooled leading indicators during the pre-crisis and crisis period using various weighting schemes. Pairwise and joint significant tests are used to evaluate single indicator as well as forecast combination methods. In addition, we use an end-of-sample instability test to investigate the stability of forecasting models during the recent financial crisis. We find in general that only a small number of single indicator models were performing well before the crisis. Pooling can substantially increase the reliability of leading indicator forecasts. During the crisis the relative performance of many leading indicator models increased. At short horizons, survey indicators perform best, while at longer horizons financial indicators, such as term spreads and risk spreads, improve relative to the benchmark.
Cross-border Diversification in Bank Asset Portfolios
We compute optimally diversified international asset portfolios for banks located in France, Germany, Italy, the United Kingdom and the United States using the mean–variance portfolio model with currency hedging. We compare these benchmark portfolios with the actual cross-border asset positions of banks from 1995 to 2003 and ask whether the differences are best explained by regulations, institutions, cultural conditions or other financial frictions. Our results suggest that both culture and regulations affect the probability of a country's being overweighted in banks' portfolios: countries whose residents score higher on a survey measure of trust are more likely to be overweighted, while countries that have tighter capital controls are less likely to be overweighted. From a policy standpoint, the importance of culture suggests a limit to the degree of financial integration that may be achievable by the removal of formal economic barriers.
Race to the Market: Can Standards Survive the Acceleration of Innovation and Product Life Cycles?
Spatial Dispersed Production and Network Governance, Papers Presented at the 11th Uddevalla Symposium, 15 – 17. May 2008, Kyoto, Research Report 2008,
Plagiarism of emerging market countries has for a considerable time been seen as the main challenge to the western approach of codifying and securing intellectual property rights (IPRs). This neglects the fact that historically all countries which tried to converge to the level of successful economies copied technology. The discussion shadows our view that the more imminent question is whether the steady increase in competition intensity which shortens product life cycles and puts pressure on the invention and innovation system, provides enough time to patent and to standardize. As patent activity not only provides incentives for sinking costs into R&D but is also a first step in the dissemination of technologies, and as standards, especially formal standards, generate level playing fields in broad and reliable markets, this may be critical in the long run. Furthermore, the migration of technologies as a result of a steady reorganization of the spatial division of labor may lead to the adverse situation that countries harboring technologies do not have appropriate institutions for knowledge codification.
Exogenous factors that – at least in the short run – cannot be influenced by the standardization bodies are the level of cooperation among interested parties (and mutual trust and institutional linkage), the competitiveness of the technology, the ability to generate externalities by knowledge codification, and the productivity of the technologies. The most important single success factor that standardization bodies can influence is the speed with which a committee proceeds to timely publish formal standards. With reference to a game-theoretical model and based on data for 1997 and 2007 on published formal standards, we show that until now, standardization bodies seem to have successfully coped with the situation.
The Relationship between Knowledge Intensity and Market Concentration in European Industries: An inverted U-Shape
IWH Discussion Papers,
This paper is motivated by the European Union strategy to secure competitiveness for Europe in the globalising world by focussing on technological supremacy (the Lisbon - agenda). Parallel to that, the EU Commission is trying to take a more economic approach to competition policy in general and anti-trust policy in particular. Our analysis tries to establish the relationship between increasing knowledge intensity and the resulting market concentration: if the European Union economy is gradually shifting to a pattern of sectoral specialisation that features a bias on knowledge intensive sectors, then this may well have some influence on market concentration and competition policy would have to adjust not to counterfeit the Lisbon-agenda. Following a review of the available theoretical and empirical literature on the relationship between knowledge intensity and market structure, we use a larger Eurostat database to test the shape of this relationship. Assuming a causality that runs from knowledge to concentration, we show that the relationship between knowledge intensity and market structures is in fact different for knowledge intensive industries and we establish a non-linear, inverted U-curve shape.
Market Follows Standards
Wirtschaft im Wandel,
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).