Forced to Freedom? Empirical Relations between Aid and Economic Freedom
Tobias Knedlik, Franz Kronthaler
IWH Discussion Papers,
No. 8,
2006
Abstract
The paper explores the relationships between economic freedom on the one side and development aid and IMF credit as approximation for conditional aid on the other side. After a short review of current literature on the issue of economic development, economic freedom, aid, and IMF credit, the paper develops a simple panel regression model to evaluate the relationship between “economic freedom” as dependent variable and “aid” and “IMF credit” as independent variables. The estimation is based upon data taken from the World Bank’s World Development Indicators and the Heritage Index of Economic Freedom. In contrast to previous research, our results allow the rejection of the hypothesis that IMF credit increases economic freedom and that aid is not contributing to economic freedom. The estimation results suggest that, firstly, aid is positively correlated with economic freedom, and secondly, that IMF credit is negatively correlated with economic freedom. Taking IMF credit as proxy for conditional aid, we conclude that for the period of observation it could not be shown that countries can be forced to economic freedom by aid conditions.
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Progressivity and Flexibility in Developing an Effective Competition Regime: Using Experiences of Poland, Ukraine, and South Africa for developing countries
Franz Kronthaler, Johannes Stephan
IWH Discussion Papers,
No. 6,
2006
Abstract
The paper discusses the role of the concept of special and differential treatment in the framework of regional trade agreements for the development of a competition regime. After a discussion of the main characteristics and possible shortfalls of those concepts, three case countries are assessed in terms of their experience with progressivity, flexibility, and technical and financial assistance: Poland was led to align its competition laws to match the model of the EU. The Ukraine opted voluntarily for the European model, this despite its intense integration mainly with Russia. South Africa, a developing country that emerged from a highly segregated social fabric and an economy dominated by large conglomerates with concentrated ownership. All three countries enacted (or comprehensively reformed) their competition laws in an attempt to face the challenges of economic integration and catch up development on the one hand and particular social problems on the other. Hence, their experience may be pivotal for a variety of different developing countries who are in negotiations to include competition issues in regional trade agreements. The results suggest that the design of such competition issues have to reflect country-particularities to achieve an efficient competition regime.
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Economies of Scope in European Railways: An Efficiency Analysis
Christian Growitsch, Heike Wetzel
IWH Discussion Papers,
No. 5,
2006
Abstract
In the course of railway reforms in the end of the last century, national European governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway companies – companies owning a network and providing transport services – argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investigate the performance of European railways with a particular focus on economies of vertical integration. We test the hypothesis that integrated railways realise economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply a Data Envelopment Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a virtual reference set consisting of the separated production technology. Our findings are that in a majority of European Railway companies exist economies of scope.
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Equity and Bond Market Signals as Leading Indicators of Bank Fragility
Reint E. Gropp, Jukka M. Vesala, Giuseppe Vulpes
Journal of Money, Credit and Banking,
No. 2,
2006
Abstract
We analyse the ability of the distance to default and subordinated bond spreads to signal bank fragility in a sample of EU banks. We find leading properties for both indicators. The distance to default exhibits lead times of 6-18 months. Spreads have signal value close to problems only. We also find that implicit safety nets weaken the predictive power of spreads. Further, the results suggest complementarity between both indicators. We also examine the interaction of the indicators with other information and find that their additional information content may be small but not insignificant. The results suggest that market indicators reduce type II errors relative to predictions based on accounting information only.
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Determinants of employment - the macroeconomic view
Christian Dreger, Heinz P. Galler, Ulrich (eds) Walwai
Schriften des IWH,
No. 22,
2005
Abstract
The weak performance of the German labour market over the past years has led to a significant unemployment problem. Currently, on average 4.5 mio. people are without a job contract, and a large part of them are long-term unemployed. A longer period of unemployment reduces their employability and aggravates the problem of social exclusion.
The factors driving the evolution of employment have been recently discussed on the workshop Determinanten der Beschäftigung – die makroökonomische Sicht organized jointly by the IAB, Nuremberg, and the IWH, Halle. The present volume contains the papers and proceedings to the policy oriented workshop held in November 2004, 15-16th. The main focus of the contributions is twofold. First, macroeconomic conditions to stimulate output and employment are considered. Second, the impacts of the increasing tax wedge between labour costs and the take home pay are emphasized. In particular, the role of the contributions to the social security system is investigated.
In his introductory address, Ulrich Walwei (IAB) links the unemployment experience to the modest path of economic growth in Germany. In addition, the low employment intensity of GDP growth and the temporary standstill of the convergence process of the East German economy have contributed to the weak labour market performance. In his analysis, Gebhard Flaig (ifo Institute, München) stresses the importance of relative factor price developments. A higher rate of wage growth leads to a decrease of the employment intensity of production, and correspondingly to an increase of the threshold of employment. Christian Dreger (IWH) discusses the relevance of labour market institutions like employment protection legislation and the structure of the wage bargaining process on the labour market outcome. Compared to the current setting, policies should try to introduce more flexibility in labour markets to improve the employment record. The impact of interest rate shocks on production is examined by the paper of Boris Hofmann (Deutsche Bundesbank, Frankfurt). According to the empirical evidence, monetary policy cannot explain the modest economic performance in Germany. György Barabas and Roland Döhrn (RWI Essen) have simulated the effects of a world trade shock on output and employment. The relationships have been fairly stable over the past years, even in light of the increasing globalization. Income and employment effects of the German tax reform in 2000 are discussed by Peter Haan and Viktor Steiner (DIW Berlin). On the base of a microsimulation model, household gains are determined. Also, a positive relationship between wages and labour supply can be established. Michael Feil und Gerd Zika (IAB) have examined the employment effects of a reduction of the contribution rates to the social security system. To obtain robust results, the analysis is done under alternative financing scenarios and with different macroeconometric models. The impacts of allowances of social security contributions on the incentives to work are discussed by Wolfgang Meister and Wolfgang Ochel (ifo München). According to their study, willingness to work is expected to increase especially at the lower end of the income distribution. The implied loss of contributions could be financed by higher taxes.
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The Impact of Institutions on the Employment Performance in European Labour Markets
Herbert S. Buscher, Christian Dreger, Raúl Ramos, Jordi Surinach
Discussion Paper No. 1732,
2005
Abstract
Der Beitrag untersucht die Bedeutung von institutionellen Regelungen auf den Arbeitsmärkten in den Staaten der EU. Da die Beschäftigungsquoten relativ unverändert blieben in der Vergangenheit, stellt sich Arbeitslosigkeit im wesentlichen als ein Problem der Arbeitsnachfrage dar. Die Arbeitsnachfrage enthält neben den üblichen Variablen weitere Variablen, die die institutionellen Rahmenbedingungen erfassen wie Gewerkschaftsdichte, Verhandlungsmacht, Steuer- und Abgabensystem, Maße der aktiven Arbeitsmarktpolitik etc.
Da zwischen den Modellvariablen Kointegrationsbeziehungen bestehen, werden die Gleichungen in Niveaus geschätzt. Die sich hieraus ergebenden Elastizitäten werden in einem zweiten Schritt dann durch institutionelle Variablen erklärt, was in einem Fixed-effects-Modell geschieht. Die Ergebnisse zeigen, dass mit steigender Flexibilität des Arbeitsmarktes und mit wachsenden Anreizen für die Haushalte Arbeit aufzunehmen, die Beschäftigungsquoten zunehmen.
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Advances in macroeconometric modeling: Papers and Proceedings of the 4th IWH Workshop in Macroeconometrics
Christian Dreger
Schriften des IWH,
No. 19,
2005
Abstract
This volume contains the contributions to the 4th Workshop of the Halle Institute for Economic Research IWH (www.iwh-halle.de) in macroeconometrics held in November 2003. The workshop takes place every year and is especially designed for the presentation of new work in the field of applied research.
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Quality of Service, Efficiency, and Scale in Network Industries: An Analysis of European Electricity Distribution
Christian Growitsch, Tooraj Jamasb, Michael Pollitt
IWH Discussion Papers,
No. 3,
2005
Abstract
Quality of service is of major economic significance in natural monopoly infrastructure industries and is increasingly addressed in regulatory schemes. However, this important aspect is generally not reflected in efficiency analysis of these industries. In this paper we present an efficiency analysis of electricity distribution networks using a sample of about 500 electricity distribution utilities from seven European countries. We apply the stochastic frontier analysis (SFA) method on multi-output translog input distance function models to estimate cost and scale efficiency with and without incorporating quality of service. We show that introducing the quality dimension into the analysis affects estimated efficiency significantly. In contrast to previous research, smaller utilities seem to indicate lower technical efficiency when incorporating quality. We also show that incorporating quality of service does not alter scale economy measures. Our results emphasise that quality of service should be an integrated part of efficiency analysis and incentive regulation regimes, as well as in the economic review of market concentration in regulated natural monopolies.
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Determinants and Effects of Foreign Direct Investment: Evidence from German Firm-Level Data
Claudia M. Buch, J. Kleinert, A. Lipponer
Economic Policy,
No. 41,
2005
Abstract
Foreign direct investment is an essential aspect of ‘globalization’ yet its empirical determinants are not well understood. What we do know is based either on poor data for a wide range of nations, or good data for the US and Swedish cases. In this paper, we provide evidence on the determinants of the activities of German multinational firms by using a newly available firm-level data set from the Deutsche Bundesbank. The specific goal of this paper is to demonstrate the relative role of country-level and firm-level determinants of foreign direct investment. We focus on three main questions: First, what are the main driving forces of German firms’ multinational activities? Second, is there evidence that sector-level and firm-level factors shape internationalization patterns? Third, is there evidence of agglomeration effects in the foreign activities of German firms? We find that the market access motive for internationalization dominates. Firms move abroad mainly to gain better access to large foreign markets. Cost-saving motives, however, are important for some manufacturing sectors. Our results strongly suggest that firm-level heterogeneity has an important influence on internationalization patterns – as stressed by recent models of international trade. We also find positive agglomeration effects for the activities of German firms that stem from the number of other German firms that are active on a given foreign market. In terms of lessons for economic policy, our results show that lowering barriers to the integration of markets and encouraging the formation of human capital can promote the activities of multinational firms. However, our results related to the heterogeneity of firms and agglomeration tendencies show that it might be difficult to fine-tune policies directed at the exploitation of synergies and at the creation of clusters of foreign firms.
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Advances in macroeconometric modeling: Papers and Proceedings of the 3rd IWH Workshop in Macroeconometrics
Christian Dreger
Schriften des IWH,
No. 15,
2004
Abstract
This volume contains the contributions to the 4th Workshop of the Halle Institute for Economic Research IWH (www.iwh-halle.de) in macroeconometrics held in November 2003. The workshop takes place every year and is especially designed for the presentation of new work in the field of applied research.
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