Is East Germany Catching Up? A Time Series Perspective
Bernd Aumann, Rolf Scheufele
IWH Discussion Papers,
Nr. 14,
2009
Abstract
This paper assesses whether the economy of East Germany is catching up with the
West German region in terms of welfare. While the primary measure for convergence and catching up is per capita output, we also look at other macroeconomic indicators such as unemployment rates, wage rates, and production levels in the manufacturingsector. In contrast to existing studies of convergence between regions of reunified Germany, our approach is purely based upon the time series dimension and is thus directly focused on the catching up process in East Germany as a region. Our testing setup includes standard ADF unit root tests as well as unit root tests that endogenously allow for a break in the deterministic component of the process. In our analysis, we find evidence of catching up for East Germany for most of the indicators. However, convergence speed is slow, and thus it can be expected that the catching up process will take further decades until the regional gap is closed.
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Evaluating Communication Strategies for Public Agencies: Transparency, Opacity, and Secrecy
Axel Lindner
B.E. Journal of Macroeconomics,
2009
Abstract
This paper analyses in a simple global games framework welfare effects stemming from different communication strategies of public agencies if strategies of agents are complementary to each other: Communication can either be fully transparent, or the agency opaquely publishes only its overall assessment of the economy, or it keeps information completely secret. It is shown that private agents put more weight on their private information in the transparent case than in the case of opacity. Thus, in many cases, the appropriate measure against overreliance on public information is giving more details to the public instead of denying access to public information.
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Industry Concentration and Regional Innovative Performance – Empirical Evidence for Eastern Germany
Christoph Hornych, Michael Schwartz
IWH Discussion Papers,
Nr. 8,
2009
Abstract
Regarding technological innovativeness, the transformed economy of the former German Democratic Republic (GDR) clearly lags behind the Western part of the country. To face this weakness, a broad mixture of policy measures was carried out in recent years. Particular attention is drawn to the development of industry concentrations and economic ‘clusters’. However, little is known about the effectiveness of these policy measures regarding how industry concentrations in fact promote innovative performance in Eastern Germany. The present study tries to fill this gap by analyzing the relationship between industry concentration in Eastern Germany and regional innovative performance. Our empirical analysis is based upon the number of patent applications of 22 manufacturing industries in 22 Eastern German planning regions. The estimated regression models indicate an inverted U-shaped relationship between the degree of industry concentration and innovative performance. An exceedingly high degree of industry concentration in one region hampers regional innovative output. We discuss policy implications of our findings and give recommendations for future refinement of ‘cluster’-supporting policy schemes in Eastern Germany.
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The Role of the Intellectual Property Rights Regime for Foreign Investors in Post-Socialist Economies
Benedikt Schnellbächer, Johannes Stephan
IWH Discussion Papers,
Nr. 4,
2009
Abstract
We integrate international business theory on foreign direct investment (FDI) with institutional theory on intellectual property rights (IPR) to explain characteristics and behaviour of foreign investment subsidiaries in Central East Europe, a region with an IPR regime-gap vis-à-vis West European countries. We start from the premise that FDI may play a crucial role for technological catch-up development in Central East Europe via technology and knowledge transfer. By use of a unique dataset generated at the IWH in collaboration with a European consortium in the framework of an EU-project, we assess the role played by the IPR regimes in a selection of CEE countries as a factor for corporate governance and control of foreign invested subsidiaries, for their own technological activity, their trade relationships, and networking partners for technological activity. As a specific novelty to the literature, we assess the in influence of the strength of IPR regimes on corporate control of subsidiaries and conclude that IPR-sensitive foreign investments tend to have lower functional autonomy, tend to cooperate more intensively within their transnational network and yet are still technologically more active than less IPR-sensitive subsidiaries. In terms of economic policy, this leads to the conclusion that the FDI will have a larger developmental impact if the IPR regime in the host economy is sufficiently strict.
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The Great Risk Shift? Income Volatility in an International Perspective
Claudia M. Buch
CESifo Working Paper No. 2465,
2008
Abstract
Weakening bargaining power of unions and the increasing integration of the world economy may affect the volatility of capital and labor incomes. This paper documents and explains changes in income volatility. Using a theoretical framework which builds distribution risk into a real business cycle model, hypotheses on the determinants of the relative volatility of capital and labor are derived. The model is tested using industry-level data. The data cover 11 industrialized countries, 22 manufacturing and services industries, and a maximum of 35 years. The paper has four main findings. First, the unconditional volatility of labor and capital incomes has declined, reflecting the decline in macroeconomic volatility. Second, the idiosyncratic component of income volatility has hardly changed over time. Third, crosssectional heterogeneity in the evolution of relative income volatilities is substantial. If anything, the labor incomes of high- and low-skilled workers have become more volatile in relative terms. Fourth, income volatility is related to variables measuring the bargaining power of workers. Trade openness has no significant impact.
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The Changing Role of the Exchange Rate in a Globalised Economy
Irina Bunda, Filippo di Mauro, Rasmus Rüffer
ECB Occasional Paper Series,
Nr. 94,
2008
Abstract
In addition to its direct effects on the global trading and production structure, the ongoing process of globalisation may have important implications for the interaction of exchange rates and the overall economy. This paper presents evidence regarding possible changes in the role of exchange rates in a more globalised economy. First, it analyses the link between exchange rates and prices, showing that there is at most a moderate decline in exchange rate pass-through for the euro area. Next, it turns to the effect of exchange rate changes on trade flows. The findings indicate that the responsiveness of euro area exports to exchange rate changes may have declined somewhat as a result of globalisation, reflecting mainly shifts in the geographical and sectoral composition of trade flows. The paper also provides a firm-level analysis of the impact of exchange rate changes on corporate profits, which suggests that overall this relationship appears to be relatively stable over time, although there are important cross-country differences. In addition, it studies the overall impact of exchange rates on GDP and the potential role of valuation effects as a transmission channel in the case of the euro area. JEL Classification: E3, F15, F31
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Monetary Policy and Financial (In)stability: An Integrated Micro–Macro Approach
Ferre De Graeve, Thomas Kick, Michael Koetter
Journal of Financial Stability,
Nr. 3,
2008
Abstract
Evidence on central banks’ twin objective, monetary and financial stability, is scarce. We suggest an integrated micro–macro approach with two core virtues. First, we measure financial stability directly at the bank level as the probability of distress. Second, we integrate a microeconomic hazard model for bank distress and a standard macroeconomic model. The advantage of this approach is to incorporate micro information, to allow for non-linearities and to permit general feedback effects between financial distress and the real economy. We base the analysis on German bank and macro data between 1995 and 2004. Our results confirm the existence of a trade-off between monetary and financial stability. An unexpected tightening of monetary policy increases the probability of distress. This effect disappears when neglecting microeffects and non-linearities, underlining their importance. Distress responses are largest for small cooperative banks, weak distress events, and at times when capitalization is low. An important policy implication is that the separation of financial supervision and monetary policy requires close collaboration among members in the European System of Central Banks and national bank supervisors.
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