Implementation of Competition Law in Developing and Transition Countries. Theoretical and Empirical Considerations
Franz Kronthaler
Schriften des IWH,
Nr. 26,
2007
Abstract
The success of free market economies over the last 200 years supports the notion that competition increases individual and social wealth. Developing countries that have undergone the necessary reforms today are amongst the most driving “emerging” economies in the world.
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Slippery Slopes of Stress: Ordered Failure Events in German Banking
Thomas Kick, Michael Koetter
Journal of Financial Stability,
Nr. 2,
2007
Abstract
Outright bank failures without prior indication of financial instability are very rare. In fact, banks can be regarded as troubled to varying degrees before outright closure. But failure studies usually neglect the ordinal nature of bank distress. We distinguish four different kinds of increasingly severe events on the basis of the distress database of the Deutsche Bundesbank. Only the worst distress event entails a bank to exit the market. Since the four categories of hazard functions are not proportional, we specify a generalized ordered logit model to estimate respective probabilities of distress simultaneously. We find that the likelihood of ordered distress events changes differently in response to given changes in the financial profiles of banks. Consequently, bank failure studies should account more explicitly for the different shades of distress. This allows an assessment of the relative importance of financial profile components for different degrees of bank distress.
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Interbank Exposures: An Empirical Examination of Contagion Risk in the Belgian Banking System
Hans Degryse, Grégory Nguyen
International Journal of Central Banking,
Nr. 2,
2007
Abstract
Robust (cross-border) interbank markets are important for the proper functioning of modern financial systems. However, a network of interbank exposures may lead to domino effects following the event of an initial bank failure. We investigate the evolution and determinants of contagion risk for the Belgian banking system over the period 1993–2002 using detailed information on aggregate interbank exposures of individual banks, large bilateral interbank exposures, and cross-border interbank exposures. The "structure" of the interbank market affects contagion risk. We find that a change from a complete structure (where all banks have symmetric links) toward a "multiplemoney-center" structure (where money centers are symmetrically linked to otherwise disconnected banks) has decreased the risk and impact of contagion. In addition, an increase in the relative importance of cross-border interbank exposures has lowered local contagion risk. However, this reduction may have been compensated by an increase in contagion risk stemming from foreign banks.
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Banks’ Internationalization Strategies: The Role of Bank Capital Regulation
Diemo Dietrich, Uwe Vollmer
IWH Discussion Papers,
Nr. 18,
2006
Abstract
This paper studies how capital requirements influence a bank’s mode of entry into foreign financial markets. We develop a model of an internationally operating bank that creates and allocates liquidity across countries and argue that the advantage of multinational banking over offering cross-border financial services depends on the benefit and the cost of intimacy with local markets. The benefit is that it allows to create more liquidity. The cost is that it causes inefficiencies in internal capital markets, on which a multinational bank relies to allocate liquidity across countries. Capital requirements affect this trade-off by influencing the degree of inefficiency in internal capital markets.
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Microeconometric Evaluation of Selected ESF-funded ALMP-Programmes
Eva Reinowski, Birgit Schultz
IWH Discussion Papers,
Nr. 17,
2006
Abstract
The study evaluates different ESF-funded labour market programmes by comparing the labour market status at different points in time after the treatment. In order to solve the selection problem we employ a standard matching algorithm with a multi-dimensional distance measure. The effects of the analyzed programmes (wage subsidies, start-up subsidies and qualification measures for recipients of social welfare) are very heterogeneous. It can be observed that the direct integration into the regular labour market provides an advantage for the supported individuals. Its lasting effects, however, strongly depend on the group of persons being supported, the type of treatment and the employers’ financial share.
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Excess Volatility in European Equity Style Indices - New Evidence
Marian Berneburg
IWH Discussion Papers,
Nr. 16,
2006
Abstract
Are financial markets efficient? One proposition that seems to contradict this is Shiller’s finding of excess volatility in asset prices and its resulting rejection of the discounted cash flow model. This paper replicates Shiller’s approach for a different data set and extends his analysis by testing for a long-run relationship by means of a cointegration analysis. Contrary to previous studies, monthly data for an integrated European stock market is being used, with special attention to equity style investment strategies. On the basis of this analysis’ results, Shiller’s findings seem questionable. While a long-run relationship between prices and dividends can be observed for all equity styles, a certain degree, but to a much smaller extent than in Shiller’s approach, of excess volatility cannot be rejected. But it seems that a further relaxation of Shiller’s assumptions would completely eliminate the finding of an overly strong reaction of prices to changes in dividends. Two interesting side results are, that all three investment styles seem to have equal performance when adjusting for risk, which by itself is an indication for efficiency and that market participants seem to use current dividend payments from one company as an indication for future dividend payments by other firms. Overall the results of this paper lead to the conclusion that efficiency cannot be rejected for an integrated European equity market.
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Progressivity and flexibility in developing an effective competition regime: using experiences of Poland, Ukraine and South Africa for developing countries. Forschungsbericht innerhalb des EU-Projektes: Competition Policy Foundations for Trade Reform, Regulatory Reform, and Sustainable Development, 2005
Franz Kronthaler, Johannes Stephan
Einzelveröffentlichungen,
Nr. 5,
2005
Abstract
The paper discusses the role of the concept of special and differential treatment in the framework of regional trade agreements for the development of a competition regime. After a discussion of the main characteristics and possible shortfalls of those concepts, three case countries are assessed in terms of their experience with progressivity, flexibility, and technical and financial assistance: Poland was led to align its competition laws to match the model of the EU. The Ukraine opted voluntarily for the European model, this despite its intense integration mainly with Russia. South Africa, a developing country that emerged from a highly segregated social fabric and an economy dominated by large conglomerates with concentrated ownership. All three countries enacted (or comprehensively reformed) their competition laws in an attempt to face the challenges of economic integration and catch up development on the one hand and particular social problems on the other. Hence, their experience may be pivotal for a variety of different developing countries who are in negotiations to include competition issues in regional trade agreements. The results suggest that the design of such competition issues have to reflect country-particularities to achieve an efficient competition regime.
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Progressivity and Flexibility in Developing an Effective Competition Regime: Using Experiences of Poland, Ukraine, and South Africa for developing countries
Franz Kronthaler, Johannes Stephan
IWH Discussion Papers,
Nr. 6,
2006
Abstract
The paper discusses the role of the concept of special and differential treatment in the framework of regional trade agreements for the development of a competition regime. After a discussion of the main characteristics and possible shortfalls of those concepts, three case countries are assessed in terms of their experience with progressivity, flexibility, and technical and financial assistance: Poland was led to align its competition laws to match the model of the EU. The Ukraine opted voluntarily for the European model, this despite its intense integration mainly with Russia. South Africa, a developing country that emerged from a highly segregated social fabric and an economy dominated by large conglomerates with concentrated ownership. All three countries enacted (or comprehensively reformed) their competition laws in an attempt to face the challenges of economic integration and catch up development on the one hand and particular social problems on the other. Hence, their experience may be pivotal for a variety of different developing countries who are in negotiations to include competition issues in regional trade agreements. The results suggest that the design of such competition issues have to reflect country-particularities to achieve an efficient competition regime.
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Economies of Scope in European Railways: An Efficiency Analysis
Christian Growitsch, Heike Wetzel
IWH Discussion Papers,
Nr. 5,
2006
Abstract
In the course of railway reforms in the end of the last century, national European governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway companies – companies owning a network and providing transport services – argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investigate the performance of European railways with a particular focus on economies of vertical integration. We test the hypothesis that integrated railways realise economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply a Data Envelopment Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a virtual reference set consisting of the separated production technology. Our findings are that in a majority of European Railway companies exist economies of scope.
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Determinants of employment - the macroeconomic view
Christian Dreger, Heinz P. Galler, Ulrich (eds) Walwai
Schriften des IWH,
Nr. 22,
2005
Abstract
The weak performance of the German labour market over the past years has led to a significant unemployment problem. Currently, on average 4.5 mio. people are without a job contract, and a large part of them are long-term unemployed. A longer period of unemployment reduces their employability and aggravates the problem of social exclusion.
The factors driving the evolution of employment have been recently discussed on the workshop Determinanten der Beschäftigung – die makroökonomische Sicht organized jointly by the IAB, Nuremberg, and the IWH, Halle. The present volume contains the papers and proceedings to the policy oriented workshop held in November 2004, 15-16th. The main focus of the contributions is twofold. First, macroeconomic conditions to stimulate output and employment are considered. Second, the impacts of the increasing tax wedge between labour costs and the take home pay are emphasized. In particular, the role of the contributions to the social security system is investigated.
In his introductory address, Ulrich Walwei (IAB) links the unemployment experience to the modest path of economic growth in Germany. In addition, the low employment intensity of GDP growth and the temporary standstill of the convergence process of the East German economy have contributed to the weak labour market performance. In his analysis, Gebhard Flaig (ifo Institute, München) stresses the importance of relative factor price developments. A higher rate of wage growth leads to a decrease of the employment intensity of production, and correspondingly to an increase of the threshold of employment. Christian Dreger (IWH) discusses the relevance of labour market institutions like employment protection legislation and the structure of the wage bargaining process on the labour market outcome. Compared to the current setting, policies should try to introduce more flexibility in labour markets to improve the employment record. The impact of interest rate shocks on production is examined by the paper of Boris Hofmann (Deutsche Bundesbank, Frankfurt). According to the empirical evidence, monetary policy cannot explain the modest economic performance in Germany. György Barabas and Roland Döhrn (RWI Essen) have simulated the effects of a world trade shock on output and employment. The relationships have been fairly stable over the past years, even in light of the increasing globalization. Income and employment effects of the German tax reform in 2000 are discussed by Peter Haan and Viktor Steiner (DIW Berlin). On the base of a microsimulation model, household gains are determined. Also, a positive relationship between wages and labour supply can be established. Michael Feil und Gerd Zika (IAB) have examined the employment effects of a reduction of the contribution rates to the social security system. To obtain robust results, the analysis is done under alternative financing scenarios and with different macroeconometric models. The impacts of allowances of social security contributions on the incentives to work are discussed by Wolfgang Meister and Wolfgang Ochel (ifo München). According to their study, willingness to work is expected to increase especially at the lower end of the income distribution. The implied loss of contributions could be financed by higher taxes.
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