State Aid and Guarantees in Europe
Reint E. Gropp, Lena Tonzer
T. Beck, B. Casu (eds): The Palgrave Handbook of European Banking, London,
2016
Abstract
During the recent financial crisis, governments massively intervened in the banking sector by providing liquidity assistance and capital support to banks in distress. This helped stabilize the financial system in the short run. However, public bailouts also bear the risk of longer-term distortions, for example, by affecting bailout expectations of banks. In this chapter, the authors first provide an overview of state aid interventions during the recent crisis episode. The third section then analyzes the effects of state aid on financial stability from a theoretical view. This is followed by the description of results obtained from empirical studies. The link between the provision of state aid and politics is discussed in the section “Institutional Design and Policy Implications”. Finally, in the section “The European Banking Union” the authors describe the elements of the European Banking Union meant to resolve and restructure banks in distress and to lower the need for public intervention. Based on the preceding analysis, conclusions are drawn regarding the new design.
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The Behavioral Impact of Non-Monetary Workplace Characteristics
Sabrina Jeworrek
Schriftenreihe innovative betriebswirtschaftliche Forschung und Praxis,
Nr. 465,
2016
Abstract
This book investigates the impact of non-monetary workplace characteristics ― i.e. employee voice, task characteristics, and the provision of information ― on workers’ individual decision making and workplace performance. Given the neoclassical assumption of purely self-interested and completely rational utility maximizing individuals, workplace characteristics should be of little interest as long as they are not directly related to payment issues, so that a worker’s utility maximizing effort choice given a fixed wage level remains unaffected. Recent empirical findings, however, suggest that the use of non-monetary incentives might even be the better option to increase work performance. Three out of the four experimental studies covered by this book extend the previous research by providing more reliable insights into field behavior than conventional laboratory experiments. Given e.g. the right to self-determine one’s wage, almost all participants in the laboratory opt for the highest possible wage. Within the context of an inventory taking with 140 assistants, we conducted a natural field experiment and show that most workers ask for rather moderate wages with women being particularly conservative in their demands. Notwithstanding, wage delegation causes workers’ performance to rise and, hence, stresses the relevance of voice at the workplace. Furthermore, we provide evidence that workers also care for the content and the meaningfulness of their tasks. Uselessly exerted effort, for instance, reduces work performance as regards a completely unrelated task in the future. Taken together, the field experimental evidence presented in this book indicates that if employees find a workplace which matches their preferences, it is quite likely to be a beneficial situation not only for the employee but also for the employer. Overall good working conditions can even help workers overlook unequal treatments within the workforce, at least in the short-run and as long as there is a plausible reason for it. An additional laboratory experiment, however, suggests that additional information, e.g. about potential coworkers, might be necessary to make reasonable decisions in accordance with individual preferences.
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Losing Work, Moving Away? Regional Mobility After Job Loss
Daniel Fackler, Lisa Rippe
Abstract
Using German survey data, we investigate the relationship between involuntary job loss and regional mobility. Our results show that job loss has a strong positive effect on the propensity to relocate. We also analyze whether the high and persistent earnings losses of displaced workers can in part be explained by limited regional mobility. Our findings do not support this conjecture as we find substantial long lasting earnings losses for both movers and stayers. In the short run, movers even face slightly higher losses, but the differences between the two groups of displaced workers are never statistically significant. This challenges whether migration is a beneficial strategy in case of involuntary job loss.
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Team Building and Hidden Costs of Control
Gerhard Riener, Simon Wiederhold
Journal of Economic Behavior and Organization,
March
2016
Abstract
In a laboratory experiment, we investigate the interaction of two prominent firm strategies to increase worker effort: team building and control. We compare a team-building treatment where subjects initially play a coordination game to gain common experience (CE) with an autarky treatment where subjects individually perform a task (NCE). In both treatments, subjects then play two-player control games where agents provide costly effort and principals can control to secure a minimum effort. CE agents always outperform NCE agents. Conditional on control, however, CE agents’ effort is crowded out more strongly, with the effect being most pronounced for agents who successfully coordinated in the team-building exercise. Differential reactions to control perceived as excessive is one explanation for our findings.
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The Levelling Effect of Product Market Competition on Gender Wage Discrimination
Boris Hirsch, Michael Oberfichtner, Claus Schnabel
IZA Journal of Labor Economics,
Nr. 19,
2014
Abstract
Using linked employer–employee panel data for West Germany that include direct information on the competition faced by plants, we investigate the effect of product market competition on the gender pay gap. Controlling for match fixed effects, we find that intensified competition significantly lowers the unexplained gap in plants with neither collective agreements nor a works council. Conversely, there is no effect in plants with these types of worker codetermination, which are unlikely to have enough discretion to adjust wages in the short run. We also document a larger competition effect in plants with few females in their workforces. Our findings are in line with Beckerian taste-based employer wage discrimination that is limited by competitive forces.
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Is More Finance Better? Disentangling Intermediation and Size Effects of Financial Systems
Thorsten Beck, Hans Degryse, Christiane Kneer
Journal of Financial Stability,
2014
Abstract
Financial systems all over the world have grown dramatically over recent decades. But is more finance necessarily better? And what concept of financial system – a focus on its size, including both intermediation and other auxiliary “non-intermediation” activities, or a focus on traditional intermediation activity – is relevant for its impact on real sector outcomes? This paper assesses the relationship between the size of the financial system and intermediation, on the one hand, and GDP per capita growth and growth volatility, on the other hand. Based on a sample of 77 countries for the period 1980–2007, we find that intermediation activities increase growth and reduce volatility in the long run. An expansion of the financial sectors along other dimensions has no long-run effect on real sector outcomes. Over shorter time horizons a large financial sector stimulates growth at the cost of higher volatility in high-income countries. Intermediation activities stabilize the economy in the medium run especially in low-income countries. As this is an initial exploration of the link between financial system indicators and growth and volatility, we focus on OLS regressions, leaving issues of endogeneity and omitted variable biases for future research.
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Heterogeneous Treatment Effects in Groups
Gerhard Riener, Simon Wiederhold
Economics Letters,
Nr. 3,
2013
Abstract
We show in a laboratory experiment that the same method of group induction carries different behavioral consequences. These heterogeneous treatment effects can be directly related to the quality of the relationship established between the subjects. Our results indicate the importance of manipulation checks in group-formation tasks in economic experiments.
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Monetary Policy in a World Where Money (Also) Matters
Makram El-Shagi, Sebastian Giesen
IWH Discussion Papers,
Nr. 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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