Technological Intensity of Government Demand and Innovation
Viktor Slavtchev, Simon Wiederhold
Abstract
Governments purchase everything from airplanes to zucchini. This paper investigates whether the technological intensity of government demand affects corporate R&D activities. In a quality-ladder model of endogenous growth, we show that an increase in the share of government purchases in high-tech industries increases the rewards for innovation, and stimulates private-sector R&D at the aggregate level. We test this prediction using administrative data on federal procurement performed in US states. Both panel fixed effects and instrumental variable estimations provide results in line with the model. Our findings bring public procurement within the realm of the innovation policy debate.
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Monetary Policy in a World Where Money (Also) Matters
Makram El-Shagi, Sebastian Giesen
IWH Discussion Papers,
No. 6,
2012
Abstract
While the long-run relation between money and inflation as predicted by the quantity theory is well established, empirical studies of the short-run adjustment process have been inconclusive at best. The literature regarding the validity of the quantity theory within a given economy is mixed. Previous research has found support for quantity theory within a given economy by combining the P-Star, the structural VAR and the monetary aggregation literature. However, these models lack precise modelling of the short-run dynamics by ignoring interest rates as the main policy instrument. Contrarily, most New Keynesian approaches, while excellently modeling the short-run dynamics transmitted through interest rates, ignore the role of money and thus the potential mid-and long-run effects of monetary policy. We propose a parsimonious and fairly unrestrictive econometric model that allows a detailed look into the dynamics of a monetary policy shock by accounting for changes in economic equilibria, such as potential output and money demand, in a framework that allows for both monetarist and New Keynesian transmission mechanisms, while also considering the Barnett critique. While we confirm most New Keynesian findings concerning the short-run dynamics, we also find strong evidence for a substantial role of the quantity of money for price movements.
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Specialization versus Diversification: Perceived Benefits of Different Incubation Models
Michael Schwartz, Christoph Hornych
International Journal of Entrepreneurship and Innovation Management,
No. 3,
2012
Abstract
Business incubator initiatives are a widespread policy instrument for the promotion of entrepreneurship, innovation and the development of new technology-based firms. Recently, there has been an increasing tendency for the more traditional diversified incubators to be superseded by incubators focusing their support elements, processes and selection criteria on firms from one specific sector, and its particular needs. Despite the increasing importance of such specialized incubators in regional innovation strategies, the question of whether they are advantageous has neither been investigated empirically nor discussed theoretically in detail. Drawing on large-scale survey data from 161 firms incubated in either diversified or specialized incubators in Germany, we investigate the benefits to firms of being part of a specialized business incubator as opposed to being part of a generalized business incubator. The investigation of the value-added contribution of specialized incubators, in particular regarding hardware components, business assistance, networking and reputation gains, reveals considerable differences compared to the more diversified incubation model.
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Effects of Fiscal Stimulus in Structural Models
Mathias Trabandt, Günter Coenen, Christopher J. Erceg, Charles Freedman, Davide Furceri, Michael Kumhof, René Lalonde, Douglas Laxton, Jesper Lindé, Annabelle Mourougane, Dirk Muir, Susanna Mursula, Carlos de Resende, John Roberts, Werner Roeger, Stephen Snudden, Jan in't Veld
American Economic Journal: Macroeconomics,
No. 1,
2012
Abstract
The paper subjects seven structural DSGE models, all used heavily by policymaking institutions, to discretionary fiscal stimulus shocks using seven different fiscal instruments, and compares the results to those of two prominent academic DSGE models. There is considerable agreement across models on both the absolute and relative sizes of different types of fiscal multipliers. The size of many multipliers is large, particularly for spending and targeted transfers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher spending or deficits imply significantly lower initial multipliers.
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Incubator Organizations as Entrepreneurship and SME Policy Instrument in Transition Economies: A Survey among six Countries
Michael Schwartz, Sebastian Blesse
Asia Pacific Journal of Innovation and Entrepreneurship,
No. 3,
2011
Abstract
Within incubator-incubation research, there is a predominant focus on incubator organizations located in industrialized or developed economies. Knowledge regarding the evolution of incubators located in transition economies is almost non-existent. However, meanwhile a significant number of incubators have been established since the fall of the iron curtain in many Central and Eastern European (CEE) countries as well. Here, the present paper sets in through providing evidence on the development, distribution and structural characteristics of incubators in six selected CEE countries (Poland, Czech Republic, Slovakia, Lithuania, Estonia and Latvia). We show that incubator organizations have become a central element of support infrastructure for SME and entrepreneurship in CEE countries during the past 20 years. We further argue that by drawing upon the accumulated experience with incubators in developed Western (European) economies, there are important lessons to be learned for incubator stakeholders in transition economies. We, therefore, outline particular suggestions considered to be vital for long-term successful incubation processes in transition economies.
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How does Institutional Setting Affect the Impact of EU Structural Funds on Economic Cohesion? New Evidence from Central and Eastern Europe
Marina Grusevaja, Toralf Pusch
Abstract
Structural Funds are the main instrument of the EU cohesion policy. Their effective use is subject to an ongoing debate in political and scientific circles. European fiscal assistance under this heading should promote economic and social cohesion in the member states of the European Union. Recently, the domestic institutional capacity to absorb, to distribute and to invest Structural Funds effectively has become a crucial determinant of the cohesion process and has attracted attention of the scientific community. The aim of this study is to shed light on the effectiveness of Structural Funds in the countries of the first Central and Eastern European enlargement round in 2004. Using regional data for these countries, we have a look on the impact of several institutional governance variables on the effectiveness of Structural Funds. In the interpretation of results, reference is
made to regional economics. Results of the empirical analysis indicate an influence of certain institutional variables on the effectiveness of Structural Funds in the new member states.
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Africa and the Global Financial Crisis - Impact on Economic Reform Processes
R. Adelou Alabi, J. Alemazung, Achim Gutowski, Robert Kappel, Tobias Knedlik, O. Osnachi Uzor, Karl Wohlmuth, Hans H. Bass
African Development Perspectives Yearbook, Vol. 15,
2011
Abstract
In volume XV of the African Development Perspectives Yearbook, the Research Group on African Development Perspectives investigates the impact of the GFC on economic reform processes in Africa. The analysis is structured in such a way so as to reflect the opportunities and dangers of policy reversals in the face of the GFC. The impact of the crisis on different types and forms of governance in the region is considered. The first question is therefore which macro-economic policy instruments have to be applied in order to overcome the crisis and to continue with sustainable development. The second question is how the GFC has affected Africa's external economic relations and if the path of opening up to the world markets is continued. The third question raised is how the crisis has affected social cohesion, impacted on poverty alleviation strategies and the achievement of Millennium Development Goals (MDGs). All these questions are discussed in the various contributions which comprise general studies and country case studies. The authors also looked into the role of international financial institutions during and after the crisis. The volume XV of the African Development Perspectives Yearbook is structured into three Units. Unit 1 addresses general issues regarding the impact of the GFC on reform processes in Africa. Unit 2 presents case studies from countries and sub-regions. Unit 3 presents reviews and book notes of current literature focusing on issues of African development perspectives.
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Extreme Risks in Financial Markets and Monetary Policies of the Euro-candidates
Hubert Gabrisch, Lucjan T. Orlowski
Comparative Economic Studies,
No. 4,
2011
Abstract
This study investigates extreme tail risks in financial markets of the euro-candidate countries and their implications for monetary policies. Our empirical tests show the prevalence of extreme risks in the conditional volatility series of selected financial variables, that is, interbank rates, equity market indexes and exchange rates. We argue that excessive instability of key target and instrument variables should be mitigated by monetary policies. Central banks in these countries will be well-advised to use both standard and unorthodox (discretionary) tools of monetary policy while steering their economies out of the financial crisis and through the euro-convergence process.
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Can Korea Learn from German Unification?
Ulrich Blum
IWH Discussion Papers,
No. 3,
2011
Abstract
We first analyze pre-unification similarities and differences between the two Germanys and the two Koreas in terms of demographic, social, political and economic status. An important issue is the degree of international openness. “Stone-age” type communism of North Korea and the seclusion of the population prevented inner-Korean contacts and contacts with rest of the world. This may create enormous adjustment costs if institutions, especially informal institutions, change. We go on by showing how transition and integration interact in a potential unification process based on the World Bank Revised Minimum Standard Model (RMSM) and on the Salter-Swan-Meade model. In doing so, we relate the macro and external impacts on an open economy to its macro-sectoral structural dynamics. The findings suggest that it is of utmost importance to relate microeconomic policies to the macroeconomic ties and side conditions for both parts of the country. Evidence from Germany suggests that the biggest general error in unification was neglecting these limits, especially limitations to policy instruments. Econometric analysis supports these findings. In the empirical part, we consider unification as an “investment” and track down the (by-and-large immediate to medium-term) costs and the (by-and-large long-term) benefits of retooling a retarded communist economy. We conclude that, from a South-Korean
perspective, the Korean unification will become relatively much more expensive than the German unification and, thus, not only economic, but to a much larger degree political considerations must include the tying of neighboring countries into the convergence process. We finally provide, 62 years after Germany’s division and 20 years after unification, an outlook on the strength of economic inertia in order to show that it may take much more than a generation to compensate the damage inflicted by the communist system.
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Wechsel in der Geldpolitik – aber bitte nur den Kurs, nicht das Paradigma – ein Kommentar
Diemo Dietrich
Wirtschaft im Wandel,
No. 2,
2011
Abstract
Die EZB hat im Februar die Beibehaltung ihres extrem expansiven geldpolitischen Kurses beschlossen und zudem noch immer keine Zeichen gesetzt, die auf eine baldige Abkehr hiervon schließen lassen könnten. Dabei sollten sowohl die beispiellose Liquiditätsausweitung als auch die vielfältigen Rettungsschirme für Staaten und Banken der unmittelbaren Krisenbewältigung vorbehalten sein. Beide Instrumente scheinen aber in Westeuropa mittlerweile zum Bestandteil des Ordnungsrahmens der Wirtschaft geworden zu sein – und die für manchen Beobachter absehbaren Nebenwirkungen stellen sich nach und nach ein.
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