Evaluating the German (New Keynesian) Phillips Curve
IWH Discussion Papers,
This paper evaluates the New Keynesian Phillips Curve (NKPC) and its hybrid
variant within a limited information framework for Germany. The main interest rests on the average frequency of price re-optimization of ﬁrms. We use the labor income share as the driving variable and consider a source of real rigidity by allowing for a ﬁxed ﬁrm-speciﬁc capital stock. A GMM estimation strategy is employed as well as an identiﬁcation robust method that is based upon the Anderson-Rubin statistic. We ﬁnd out that the German Phillips Curve is purely forward looking. Moreover, our point estimates are consistent with the view that ﬁrms re-optimize prices every two to three quarters. While these estimates seem plausible from an economic point of view, the uncertainties around these estimates are very large and also consistent with perfect nominal price rigidity where ﬁrms never re-optimize prices. This analysis also oﬀers some explanations why previous results for the German NKPC based on GMM diﬀer considerably. First, standard GMM results are very sensitive to the way how orthogonality conditions are formulated. Additionally, model misspeciﬁcations may be left undetected by conventional J tests. Taken together, this analysis points out
the need for identiﬁcation robust methods to get reliable estimates for the NKPC.
The Economics of Restructuring the German Electricity Sector
Zeitschrift für Energiewirtschaft,
The debate about the development of German electricity prices after the liberalization of energy markets in 1998 raises the question of failures in market restructuring. However, a general statement would be misleading for two main reasons. Firstly, the price development, analyzed for the exemplary case of household prices, shows significant differences among the stages of the value chain. Secondly, the underlying cost structure might have changed from 1998 to 2004. While such effects can be expected to level out over time, they can distort the comparison of a small period of observation. For these reasons, we analyzed the different price components at a detailed level, finding a considerable price reduction of about 32% in generation and a much lower reduction of 13% in transmission and distribution tariffs. These decreases have been mostly compensated by a significant increase in taxes and subsidies (+56%).
An analysis of household electricity price developments in Germany since liberalization
Despite the liberalization of energy markets in 1998, household electricity prices in 2004 are nearly the same as 1998, indicating a failure of market restructuring. However, such a general consideration is misleading for two main reasons. Firstly, the price development shows significant differences among the stages of the value chain. Secondly, the underlying cost structure might have changed from 1998 to 2004. While such effects can be expected to level out over time, they can distort the comparison of a small period of observation. For these reasons, we analyzed the different price components at a detailed level, finding a considerable price reduction of about 32% in generation and a much lower reduction of 13% in transmission and distribution tariffs. These decreases have been mostly compensated by a significant increase in taxes and subsidies (+56%).
Konjunktur in Mittel- und Osteuropa gewinnt an Dynamik
Wirtschaft im Wandel,
Die robuste wirtschaftliche Expansion in Mittel- und Osteuropa hat sich ungeachtet der anhaltenden weltweiten Konjunkturschwäche im ersten Halbjahr 2003 fortgesetzt. Dabei kam es in einigen Ländern, darunter insbesondere in Russland und Polen, zu einer deutlichen Belebung. Eine rege Inlandsnachfrage unterstützte eine recht zügige Ausdehnung der Produktion, teilweise nahmen auch die Exporte stärker zu. Das reale Bruttoinlandsprodukt wird in den Beitrittsländern nach Einschätzung des IWH in diesem Jahr mit 3,1% zunehmen, nach 2,5% im vergangenen Jahr. Für 2004 ist aufgrund des zu erwartenden Anziehens der weltweiten Konjunktur mit einer Beschleunigung der wirtschaftlichen Dynamik auf 3,8% in der Region zu rechnen. Die Inflation wird sich im gesamten Prognosezeitraum weiter zurückbilden, wobei es vereinzelt auch zu einem weniger starken Rückgang des Preisauftriebs u. a. im Zuge von Steueranpassungen vor dem geplanten EU-Beitritt mittel- und osteuropäischer Länder im Frühjahr 2004 kommen kann. Der Arbeitsmarkt profitiert weiterhin nur gering von der wirtschaftlichen Expansion. Die durchschnittliche Arbeitslosenquote wird auch im nächsten Jahr noch um die 13% liegen.
Intra-industry trade between European Union and Transition Economies. Does income distribution matter?
IWH Discussion Papers,
EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the productquality
cycle, we examine income distribution factors as determinates of the emerging
EU-TE structure of trade flows. Using OLS regressions, we find first, that relative
differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between highquality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.
Price Competition between an Expert and a Non-Expert
International Journal of Industrial Organization,
This paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expert's repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behavior of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a 'timid-pricing' equilibrium results. If the non-expert's repair technology performs well enough, it pays for some consumers to disregard the non-expert a visit. They directly go to the expert's shop, and an 'aggressive-pricing' equilibrium pops up. For intermediate values of the non-expert's successful repair a 'mixed-pricing' equilibrium emerges where the expert randomizes over the monopoly price and some lower price.
Spillover Effects and R&D-Cooperations - The Influence of Market Structure
IWH Discussion Papers,
This paper examines empirically the role of market structure for the influence of spill-over effects on R&D-cooperations. The results of a microeconometric analysis, based on firm data on innovation, let in general presume that with intensified competition also the influence of spillovers on R&D-cooperation increases. However, competition seems to induce firms to search for effective firm-specific appropriation facilities first. Spillovers that are sufficiently high such that the internalisation effect from R&D-cooperation more than outweighs the competitive effect from research, only arise whenever firms are not able to protect their research results through any appropriation facility. Additionally, there is some evidence that spillover effects may even hinder firms from cooperating in R&D when there is intensive competition on the research stage.
Gesamtwirtschaftliche und unternehmerische Anpassungsfortschritte in Ostdeutschland (13. gemeinsamer Bericht des DIW Berlin, IfW Kiel und IWH Halle)
Schwerpunkt des 13. Berichtes ist eine Zwischenbilanz der Transformation der ostdeutschen Wirtschaft von der Planwirtschaft zur sozialen Marktwirtschaft nach fünf Jahren. Dazu werden die Untersuchungsergebnisse zur Erneuerung der Wirtschaftsstruktur und zur Entwicklung in ausgewählten Wirtschaftsbereichen (u. a. Industrie, Baugewerbe, Handel und Verkehr sowie Wohnungswirtschaft) präsentiert. Entwicklungshemmnisse werden benannt und Vorschläge für die Wirtschaftspolitik unterbreitet.