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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Flight Patterns and Yields of European Government Bonds
Gregor von Schweinitz
IWH Discussion Papers,
Nr. 10,
2013
Abstract
The current European Debt Crisis has led to a reinforced effort to identify the sources of risk and their influence on yields of European Government Bonds. Until now, the potentially nonlinear influence and the theoretical need for interactions reflecting flight-to-quality and flight-to-liquidity has been widely disregarded. I estimate government bond yields of the Euro-12 countries without Luxembourg from May 2003 until December 2011. Using penalized spline regression, I find that the effect of most explanatory variables is highly nonlinear. These nonlinearities, together with flight patterns of flight-to-quality and flight-to-liquidity, can explain the co-movement of bond yields until September 2008 and the huge amount of differentiation during the financial and the European debt crisis without the unnecessary assumption of a structural break. The main effects are credit risk and flight-to-liquidity, while the evidence for the existence of flight-to-quality and liquidity risk (the latter measured by the bid-ask spread and total turnover of bonds) is comparably weak.
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Hidden Gems and Borrowers with Dirty Little Secrets: Investment in Soft Information, Borrower Self-Selection and Competition
Reint E. Gropp, C. Gruendl, Andre Guettler
Abstract
This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a private signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their privately observed soft information is positive or negative. Competition affects the investment in learning the private signal from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect. Finally, we show that firms where soft information was important in the lending decision were no more likely to default compared to firms where only financial information was used.
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Has the Euro Increased International Price Elasticities?
Oliver Holtemöller, Götz Zeddies
Empirica,
Nr. 1,
2013
Abstract
The introduction of the Euro has been accompanied by the hope that international competition between EMU member states would increase due to higher price transparency. This paper contributes to the literature by analyzing price elasticities in international trade flows between Germany and France and between Germany and the United Kingdom before and after the introduction of the Euro. Using disaggregated Eurostat trade statistics, we adopt a heterogeneous dynamic panel framework for the estimation of price elasticities. We suggest a Kalman-filter approach to control for unobservable quality changes which otherwise would bias estimates of price elasticities. We divide the complete sample, which ranges from 1995 to 2008, into two sub-samples and show that price elasticities in trade between EMU members did not change substantially after the introduction of the Euro. Hence, we do not find evidence for an increase in international price competition resulting from EMU.
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Teacher Experience and the Class Size Effect - Experimental Evidence
Steffen Müller
Journal of Public Economics,
2013
Abstract
We analyze teacher experience as a moderating factor for the effect of class size reduction on student achievement in the early grades using data from the Tennessee STAR experiment with random assignment of teachers and students to classes of different sizes. The analysis is motivated by the high costs of class size reductions and the need to identify the circumstances under which this investment is most rewarding. We find a class size effect only for senior teachers. The effect exists at all deciles of the achievement distribution but is less pronounced at lower deciles. We further show that senior teachers outperform rookies only in small classes. Interestingly, the class size effect is likely due to a higher quality of instruction in small classes.
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The Determinants of Inward Foreign Direct Investment in Business Services Across European Regions
Davide Castellani
Finanza e Statistica 104/2012,
2012
Abstract
The paper accounts for the determinants of inward foreign direct investment in business services across the EU-27 regions. Together with the traditional variables considered in the literature (market size, market quality, agglomeration economies, labour cost, technology, human capital), we focus on the role of forward linkages with manufacturing sectors and other service sectors as
attractors of business services FDI at the regional level. This hypothesis is based on the evidence that the growth of business services is mostly due to increasing intermediate demand by other services industries and by manufacturing industries and on the importance of geographical proximity for forward linkages in services.
To our knowledge, there are no studies investigating the role of forward linkages for the location of FDI. This paper aims therefore to fill this gap and add to the FDI literature by providing a picture of the specificities of the determinants of FDI in business services at the regional level. The empirical analysis draws upon the database fDi Markets, from which we selected projects having as a destination NUTS 2 European regions in the sectors of Business services over the period 2003-2008. Data on FDI have been matched with data drawn from the Eurostat Regio
database. Forward linkages have been constructed using the OECD Input/Output database. By estimating a negative binomial model, we find that regions specialised in those (manufacturing) sectors that are high potential users of business services attract more FDI than other regions. This confirms the role of forward linkages for the localisation of business service FDI, particularly in the case of manufacturing.
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Stale Information, Shocks, and Volatility
Reint E. Gropp, A. Kadareja
Journal of Money, Credit and Banking,
Nr. 6,
2012
Abstract
We propose a new approach to measuring the effect of unobservable private information on volatility. Using intraday data, we estimate the effect of a well-identified shock on the volatility of stock returns of European banks as a function of the quality of public information available about the banks. We hypothesize that as publicly available information becomes stale, volatility effects and its persistence increase, as private information of investors becomes more important. We find strong support for this idea in the data. We further show that stock volatility is higher just before important announcements if information is stale.
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Technological Intensity of Government Demand and Innovation
Viktor Slavtchev, Simon Wiederhold
Abstract
Governments purchase everything from airplanes to zucchini. This paper investigates whether the technological intensity of government demand affects corporate R&D activities. In a quality-ladder model of endogenous growth, we show that an increase in the share of government purchases in high-tech industries increases the rewards for innovation, and stimulates private-sector R&D at the aggregate level. We test this prediction using administrative data on federal procurement performed in US states. Both panel fixed effects and instrumental variable estimations provide results in line with the model. Our findings bring public procurement within the realm of the innovation policy debate.
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Do Government Owned Banks Trade Market Power for Slack?
Andreas Hackethal, Michael Koetter, Oliver Vins
Applied Economics,
Nr. 33,
2012
Abstract
The ‘Quiet Life Hypothesis (QLH)’ posits that banks with market power have less incentives to maximize revenues and minimize cost. Especially government owned banks with a public mandate precluding profit maximization might succumb to a quiet life. We use a unified approach that simultaneously measures market power and efficiency to test the quiet life hypothesis of German savings banks. We find that average local market power declined between 1996 and 2006. Cost and profit efficiency remained constant. Nonparametric correlations are consistent with a quiet life regarding cost efficiency but not regarding profit efficiency. The quiet life on the cost side is negatively correlated with bank size, quality of loan portfolio and local per capita income. The last result indicates that the quiet cost life is therefore potentially due to benevolent excess consumption of local input factors by public savings banks.
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Effects of Entrepreneurship Education at Universities
S. Laspita, H. Patzelt, Viktor Slavtchev
Jena Economic Research Papers,
Nr. 25,
2012
Abstract
This study analyzes the impact of entrepreneurship education at universities on the intentions of students to become entrepreneurs or self-employed in the short-term (immediately after graduation) and in the long-term (five years after graduation). A difference-in-differences approach is applied that relates changes in entrepreneurial intentions to changes in the attendance of entrepreneurship classes in the same period. To account for a potential bias due to self-selection into entrepreneurship classes, only individuals having no prior entrepreneurial intentions are analyzed. Our results indicate a stimulating effect of entrepreneurship education on students’ intentions to become entrepreneurs or self-employed in the long-term but a discouraging effect on their intentions in the short-term. These results support the conjecture that entrepreneurship education provides more realistic perspectives on what it takes to be an entrepreneur, resulting in ‘sorting’. Overall, the results indicate that entrepreneurship education may improve the quality of labor market matches, the allocation of resources and talent, and increase social welfare. Not distinguishing between short- and long-term intentions may lead to misleading conclusions regarding the economic and social impact of entrepreneurship education.
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