Connecting to Power: Political Connections, Innovation, and Firm Dynamics
Ufuk Akcigit, Salomé Baslandze, Francesca Lotti
NBER Working Paper,
Nr. 25136,
2018
Abstract
How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: when compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design.
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Interactions Between Regulatory and Corporate Taxes: How Is Bank Leverage Affected?
Franziska Bremus, Kirsten Schmidt, Lena Tonzer
Abstract
Regulatory bank levies set incentives for banks to reduce leverage. At the same time, corporate income taxation makes funding through debt more attractive. In this paper, we explore how regulatory levies affect bank capital structure, depending on corporate income taxation. Based on bank balance sheet data from 2006 to 2014 for a panel of EU-banks, our analysis yields three main results: The introduction of bank levies leads to lower leverage as liabilities become more expensive. This effect is weaker the more elevated corporate income taxes are. In countries charging very high corporate income taxes, the incentives of bank levies to reduce leverage turn ineffective. Thus, bank levies can counteract the debt bias of taxation only partially.
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Crises and Rescues: Liquidity Transmission Through Global Banks
Michael Koetter, Claudia M. Buch, C. T. Koch
International Journal of Central Banking,
Nr. 4,
2018
Abstract
This paper shows that global banks transmit liquidity shocks via their network of foreign affiliates. We use the (unexpected) access of German banks' affiliates located in the United States to the Federal Reserve's Term Auction Facility. We condition on the parent banks' U.S. dollar funding needs in order to examine how affiliates located outside the United States adjusted their balance sheets when the U.S. affiliate of the same parent tapped into TAF liquidity. Our research has three main findings. First, affiliates tied to parents with higher U.S. dollar funding needs expanded their foreign assets during periods of active TAF borrowing. Second, the overall effects are driven by affiliates located in financial centers. Third, U.S.- dollar-denominated lending particularly increased in response to the TAF program.
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German Unification: Macroeconomic Consequences for the Country
Axel Lindner
F. Heinemann, U. Klüh, S. Watzka (eds): Monetary Policy, Financial Crises, and the Macroeconomy. Springer,
2017
Abstract
This paper shows basic macroeconomic consequences of the German unification for the country in time series spanning from 20 years before the event until 25 years thereafter. Essential findings can well be explained by elementary economic theory. Moreover, it is shown that the German economy had been off steady state already before unification in important aspects. In particular, a steep increase in the current account balance during the 1980s suggests that globalization strongly affected the German economy at that time. While unification stopped the trend to an ever more open economy and to a rising trade surplus for about 10 years, the fall of the iron curtain eventually even increased this trend in the long run.
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Predicting the Rise of EU Right-Wing Populism in Response to Unbalanced Immigration
Marko Jusup, Dejan Kovač, Boris Podobnik, H. Eugene Stanley
Complexity,
August
2017
Abstract
Among the central tenets of globalization is the free migration of labor. Although much has been written about the benefits of globalization, little is known about its limitations and how antiglobalist sentiment can be strongly affected by high levels of immigration. Analyzing poll data from a group of EU countries affected by the recent migrant crisis, we find that over the last three years the percentage of right-wing (RW) populist voters in a given country depends on the prevalence of immigrants in this country’s population and the total immigration inflow into the entire EU. The latter is likely due to the perception that the EU functions as a supranational state in which a lack of inner borders means that “someone else’s problem” can easily become “my problem.” We find that the increase in the percentage of RW voters substantially surpasses the percentage of immigration inflow, implying that if this process continues, ongoing democratic processes will cause RW populism to prevail and globalization to rapidly decrease. We locate tipping points between the fraction of immigrants and the rise of RW populism, and we model our empirical findings using a complex network framework in which the success of globalization rests on a balance between immigration and immigrant integration.
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Bank Response to Higher Capital Requirements: Evidence from a Quasi-natural Experiment
Reint E. Gropp, Thomas Mosk, Steven Ongena, Carlo Wix
Abstract
We study the impact of higher capital requirements on banks’ balance sheets and its transmission to the real economy. The 2011 EBA capital exercise provides an almost ideal quasi-natural experiment, which allows us to identify the effect of higher capital requirements using a difference-in-differences matching estimator. We find that treated banks increase their capital ratios not by raising their levels of equity, but by reducing their credit supply. We also show that this reduction in credit supply results in lower firm-, investment-, and sales growth for firms which obtain a larger share of their bank credit from the treated banks.
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Taxing Banks: An Evaluation of the German Bank Levy
Claudia M. Buch, Björn Hilberg, Lena Tonzer
Journal of Banking and Finance,
November
2016
Abstract
Bank distress can have severe negative consequences for the stability of the financial system. Regimes for the restructuring and resolution of banks, financed by bank levies, aim at reducing these costs. This paper evaluates the German bank levy, which has been implemented since 2011. Our analysis offers three main insights. First, revenues raised through the levy were lower than expected. Second, the bulk of the payments were contributed by large commercial banks and by the central institutions of savings banks and credit unions. Third, for those banks, which were affected by the levy, we find evidence for a reduction in lending and higher deposit rates.
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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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On the Distribution of Refugees in the EU
Oliver Holtemöller, Axel Lindner, Andreas Schmalzbauer, Götz Zeddies
Intereconomics,
Nr. 4,
2016
Abstract
The current situation regarding the migration of refugees can only be handled efficiently through closer international cooperation in the field of asylum policy. From an economic point of view, it would be reasonable to distribute incoming refugees among all EU countries according to a distribution key that reflects differences in the costs of integration in the individual countries. An efficient distribution would even out the marginal costs of integrating refugees. In order to reach a political agreement, the key for distributing refugees should be complemented by compensation payments that distribute the costs of integration among countries. The key for distributing refugees presented by the EU Commission takes account of appropriate factors in principle, but it is unclear in terms of detail. The compensation payments for countries that should take relatively high numbers of refugees for cost efficiency reasons should be financed by reallocating resources within the EU budget.
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