Trade Shocks, Labour Markets and Elections in the First Globalisation
Richard Bräuer, Wolf-Fabian Hungerland, Felix Kersting
Abstract
This paper studies the economic and political effects of a large trade shock in agriculture – the grain invasion from the Americas – in Prussia during the first globalisation (1871-1913). We show that this shock accelerated the structural change in the Prussian economy through migration of workers to booming cities. In contrast to studies using today’s data, we do not observe declining per capita income and political polarisation in counties affected by foreign competition. Our results suggest that the negative and persistent effects of trade shocks we see today are not a universal feature of globalisation, but depend on labour mobility. For our analysis, we digitise data from Prussian industrial and agricultural censuses on the county level and combine it with national trade data at the product level. We exploit the cross-regional variation in cultivated crops within Prussia and instrument with Italian trade data to isolate exogenous variation.
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06.10.2021 • 24/2021
IWH Bankruptcy Update: Bankruptcy Figures Remain Low; More Manufacturing Jobs Impacted
The number of corporate bankruptcies in Germany remained near to a historic low in September. However, there was a considerable increase in the share of manufacturing jobs impacted by bankruptcy. These are the key findings of the IWH Bankruptcy Update, published by the Halle Institute for Economic Research (IWH), which provides monthly statistics on corporate bankruptcies in Germany.
Steffen Müller
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The Impact of Delay: Evidence from Formal Out-of-Court Restructuring
Randall K. Filer, Dejan Kovač, Jacob N. Shapiro, Stjepan Srhoj
Abstract
Bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in such procedures impact the economic performance of participating firms in the context of Croatia, which introduced a „pre-bankruptcy settlement“ (PBS) process in the wake of the Great Recession of 2007 - 2009. Local institutions left over from the communist era provide annual financial statements for both sides of more than 180,000 debtor-creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delays entry into the standard bankruptcy procedure, leads to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We also track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures to rapidly resolve uncertainty about firms‘ future prospects.
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Financing Choice and Local Economic Growth: Evidence from Brazil
Iftekhar Hasan, Thiago Christiano Silva, Benjamin Miranda Tabak
Journal of Economic Growth,
No. 3,
2021
Abstract
We study how financing non-traditional local activities, conceived here as a proxy for activity diversification, is associated with economic growth. We use municipality-level data from Brazil, a country with large geographical, social, and economic disparities observed across its more than 5500 municipalities. We find that finance to non-traditional local activities associates with higher municipal economic growth, suggesting a positive externality between the non-traditional and traditional sectors. Using large natural disasters in Brazil as sources of unexpected negative events, we find that this association between financing non-traditional local activities and economic growth becomes negative in times of distress. We find that traditional local sectors are more affected than non-traditional sectors following a natural disaster. Precisely because of the non-traditional sector’s dependence on the traditional sector, our results suggest that municipalities should restrengthen their traditional activities during adverse conditions.
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Paid Vacation Use: The Role of Works Councils
Laszlo Goerke, Sabrina Jeworrek
Economic and Industrial Democracy,
No. 3,
2021
Abstract
The article investigates the relationship between codetermination at the plant level and paid vacation in Germany. From a legal perspective, works councils have no impact on vacation entitlements, but they can affect their use. Employing data from the German Socio-Economic Panel (SOEP), the study finds that male employees who work in an establishment, in which a works council exists, take almost two additional days of paid vacation annually, relative to employees in an establishment without such institution. The effect for females is much smaller, if discernible at all. The data suggest that this gender gap might be due to the fact that women exploit vacation entitlements more comprehensively than men already in the absence of a works council.
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29.07.2021 • 20/2021
Communication instead of conflict – why are female CEOs so interesting for hedge funds
The value of female-led firms is enhanced more by the intervention of activist investors than that of firms with male CEOs. This is the result of a recent paper by Iftekhar Hasan (Fordham University and IWH) and Qiang Wu (Rensselaer Polytechnic Institute, RPI) at the Halle Institute for Economic Research (IWH). "The results show that female CEOs particularly benefit from the intervention of hedge fund activists due to their strong communication and interpersonal skills," explains Iftekhar Hasan. This is because, on average, the intervention of an activist hedge fund increases the value of the firm ex post. To achieve this, activist hedge funds such as Carl Icahn, Trian Fundmanagement or Elliott prefer to rely on communication and cooperation with the management.
Reint E. Gropp
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06.07.2021 • 18/2021
IWH Bankruptcy Update: June Data Incomplete – Small Forecasted Increase in Bankruptcies
Despite incomplete June data, the month-over-month increase in German corporate bankruptcies is projected to be small. Furthermore, the increase is largely attributable to the higher number of business days in June, according to the IWH Bankruptcy Report, which is published by the Halle Institute for Economic Research (IWH) and provides a monthly update on German bankruptcy statistics.
Steffen Müller
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24.06.2021 • 17/2021
Loneliness during the pandemic – social isolation increases the likelihood of selfish behaviour
Social distancing as a counter-measure to the COVID-19 pandemic has far-reaching social consequences which have so far hardly been discussed from an economic perspective. This is demonstrated in a study by the Halle Institute for Economic Research (IWH). “Experiencing social isolation resulted in the participants in our study making more selfish decisions,” says the author of the study, Sabrina Jeworrek, Assistant Professor at Otto von Guericke University Magdeburg and head of research group in the Department of Structural Change and Productivity at IWH.
Sabrina Jeworrek
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Political Cycles in Bank Lending to the Government
Michael Koetter, Alexander Popov
Review of Financial Studies,
No. 6,
2021
Abstract
We study how political party turnover after German state elections affects banks’ lending to the regional government. We find that between 1992 and 2018, party turnover at the state level leads to a sharp and substantial increase in lending by local savings banks to their home-state government. This effect is accompanied by an equivalent reduction in private lending. A statistical association between political party turnover and government lending is absent for comparable cooperative banks that exhibit a similar regional organization and business model. Our results suggest that political frictions may interfere with government-owned banks’ local development objectives.
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Globalisation in Europe: Consequences for the Business Environment and Future Patterns in Light of Covid-19
Sergio Inferrera
IWH-CompNet Discussion Papers,
No. 2,
2021
Abstract
In this paper, I study the consequences of globalisation, as measured by the involvement of firms in GVC, on the business environment. In particular, I focus on concentration and productivity, firstly by estimating robust elasticities and then isolating the exogenous component of the variation in the participation in GVC. To this aim, I exploit the distance between industries in terms of upstreamness and downstreamness along the supply chain. The evidences suggest that involvement in international supply chains is positively related to concentration at the sector level and positively associated with aggregate productivity, an effect that is driven by the firms at the top of the productivity distribution. Finally, I relate these findings to the current pandemic, going beyond the lack of official statistics and estimating GVC participation for 2020 at the country-level through real time world-seaborne trade data, providing evidences on the re-absorption of the Covid shock in several European economies.
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