Foreign Bank Ownership and Income Inequality: Empirical Evidence
Manthos D. Delis, Iftekhar Hasan, Nikolaos Mylonidis
Applied Economics,
Nr. 11,
2020
Abstract
Using country-level panel data over 1995–2013 on within-country income inequality and foreign bank presence, this paper establishes a positive relation between the two, running from higher foreign bank presence to income inequality. Given that foreign bank participation increased by 62% over the period 1995 to 2013, our baseline results imply a 5.8% increase in the Gini coefficient on average over this period, ceteris paribus. These results are robust to the inclusion of country and year fixed effects and to the use of restrictions on foreign bank entry in the host countries as an instrumental variable. We show that this positive effect is channelled through the lack of greenfield entry and the associated lower levels of competition.
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Micro-mechanisms Behind Declining Labour Shares: Market Power, Production Processes, and Global Competition
Matthias Mertens
IWH-CompNet Discussion Papers,
Nr. 3,
2019
Abstract
This article investigates how changing production processes and increasing market power at the firm level relate to a fall in Germany’s manufacturing sector labour share. Coinciding with the fall of the labour share, I document a rise in firms’ product and labour market power. Notably, labour market power is a more relevant source of firms’ market power than product market power. Increasing product and labour market power, however, only account for 30% of the fall in the labour share. The remaining 70% are explained by a transition of firms towards less labour-intensive production activities. I study the role of final product trade in causing those secular movements. I find that rising foreign export demand contributes to a decline in the labour share by increasing labour market power within firms and by inducing a reallocation of economic activity from nonexporting- high-labour-share to exporting-low-labour-share firms
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Potential International Employment Effects of a Hard Brexit
Hans-Ulrich Brautzsch, Oliver Holtemöller
IWH Discussion Papers,
Nr. 4,
2019
Abstract
We use the World Input Output Database (WIOD) to estimate the potential employment effects of a hard Brexit in 43 countries. In line with other studies we assume that imports from the European Union (EU) to the UK will decline by 25% after a hard Brexit. The absolute effects are largest in big EU countries which have close trade relationships with the UK like Germany and France. However, there are also large countries outside the EU which are heavily affected via global value chains like China, for example. The relative effects (in percent of total employment) are largest in Malta and Ireland. UK employment will also be affected via intermediate input production. Within Germany, the motor vehicle industry and in particular the “Autostadt” Wolfsburg are most affected.
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Labour Market Power and the Distorting Effects of International Trade
Matthias Mertens
IWH-CompNet Discussion Papers,
Nr. 2,
2019
Abstract
This article examines how trade shocks shape labour market imperfections that create market power in labour markets and prevent an efficient allocation of labour. I develop a framework for measuring such labor market distortions in monetary terms and document large degrees of those distortions in Germany’s manufacturing sector. Import competition can only exert labor market disciplining effects when firms rather than workers have labour market power. Otherwise, export demand and import competition shocks tend to fortify existing distortions by amplifying labour market power structures. This diminishes the gains from trade compared to a model with perfectly competitive labour markets.
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Within Gain, Structural Pain: Capital Account Liberalization and Economic Growth
Xiang Li, Dan Su
New Structural Economics Working Paper No. E2018010,
2018
Abstract
This paper is the first to study the effects of capital account liberalization on structural transformation and compare the contribution of within term and structural term to economic growth. We use a 10-sector-level productivity dataset to decomposes the effects of opening capital account on within-sector productivity growth and cross-sector structural transformation. We find that opening capital account is associated with labor productivity and employment share increment in sectors with higher human capital intensity and external financial dependence, as well as non-tradable sectors. But it results in a growth-reducing structural transformation by directing labor into sectors with lower productivity. Moreover, in the ten years after capital account liberalization, the contribution share of structural transformation decreases while that of within productivity growth increases. We conclude that the relationship between capital account liberalization and economic growth is within gain and structural pain.
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Labour Market Power and the Distorting Effects of International Trade
Matthias Mertens
IWH Discussion Papers,
Nr. 18,
2018
Abstract
This article examines how trade shocks shape labour market imperfections that create market power in labour markets and prevent an efficient allocation of labour. I develop a framework for measuring such labour market distortions in monetary terms and document large degrees of those distortions in Germany’s manufacturing sector. Import competition can only exert labour market disciplining effects when firms rather than workers have labour market power. Otherwise, export demand and import competition shocks tend to fortify existing distortions by amplifying labour market power structures. This diminishes the gains from trade compared to a model with perfectly competitive labour markets.
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When Arm’s Length is too Far: Relationship Banking over the Credit Cycle
Thorsten Beck, Hans Degryse, Ralph De Haas, Neeltje van Horen
Journal of Financial Economics,
Nr. 1,
2018
Abstract
We conduct face-to-face interviews with bank CEOs to classify 397 banks across 21 countries as either relationship or transaction lenders. We then use the geographic coordinates of these banks’ branches and of 14,100 businesses to analyze how the lending techniques of banks in the vicinity of firms are related to credit constraints at two contrasting points of the credit cycle. We find that while relationship lending is not associated with credit constraints during a credit boom, it alleviates such constraints during a downturn. This positive role of relationship lending is stronger for small and opaque firms and in regions with a more severe economic downturn. Moreover, our evidence suggests that relationship lending mitigates the impact of a downturn on firm growth and does not constitute evergreening of loans.
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