Projects
Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Population and labour market
Population and labour market Inhabitants are all people (Germans and foreigners) with permanent residence in federal territory (or in a Land). That does not include members of…
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Long-run Competitive Spillovers of the Credit Crunch
William McShane
IWH Discussion Papers,
No. 10,
2023
Abstract
Competition in the U.S. appears to have declined. One contributing factor may have been heterogeneity in the availability of credit during the financial crisis. I examine the impact of product market peer credit constraints on long-run competitive outcomes and behavior among non-financial firms. I use measures of lender exposure to the financial crisis to create a plausibly exogenous instrument for product market credit availability. I find that credit constraints of product market peers positively predict growth in sales, market share, profitability, and markups. This is consistent with the notion that firms gained at the expense of their credit constrained peers. The relationship is robust to accounting for other sources of inter-firm spillovers, namely credit access of technology network and supply chain peers. Further, I find evidence of strategic investment, i.e. the idea that firms increase investment in response to peer credit constraints to commit to deter entry mobility. This behavior may explain why temporary heterogeneity in the availability of credit appears to have resulted in a persistent redistribution of output across firms.
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European Real Estate Markets During the Pandemic: Is COVID-19 also a Case for House Price Concerns?
Michael Koetter, Felix Noth
IWH Policy Notes,
No. 3,
2022
Abstract
We use a new database on European real estate purchase and rental prices – the IWH European Real Estate Index – to document the relationship between staggered COVID-19 dynamics and real estate prices in 14 EU countries between January 2020 and December 2021. For most countries, we find no statistically significant response of monthly purchase and rental prices due to an increase of regional COVID-19 cases. For the UK we find that more COVID-19 cases depressed both purchase and rental prices significantly, but the economic magnitude of effects was mild during this sample period. In contrast, rents in Italy increased in response to hiking COVID-19 cases, illustrating the importance to consider heterogeneous crisis patterns across the EU when designing policies. Overall, COVID-19 dynamics did not affect real estate values significantly during the pandemic, thereby mitigating potential financial stability concerns via a mortgage lending channel at the time.
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Surges and Instability: The Maturity Shortening Channel
Xiang Li, Dan Su
Journal of International Economics,
November
2022
Abstract
Capital inflow surges destabilize the economy through a maturity shortening mechanism. The underlying reason is that firms have incentives to redeem their debt on demand to accommodate the potential liquidity needs of global investors, which makes international borrowing endogenously fragile. Based on a theoretical model and empirical evidence at both the firm and macro levels, our main findings are twofold. First, a significant association exists between surges and shortened corporate debt maturity, especially for firms with foreign bank relationships and higher redeployability. Second, the probability of a crisis following surges with a flattened yield curve is significantly higher than that following surges without one. Our study suggests that debt maturity is the key to understand the financial instability consequences of capital inflow bonanzas.
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Firm Subsidies, Financial Intermediation, and Bank Stability
Aleksandr Kazakov, Michael Koetter, Mirko Titze, Lena Tonzer
IWH Discussion Papers,
No. 24,
2022
Abstract
We use granular project-level information for the largest regional economic development program in German history to study whether government subsidies to firms affect the quantity and quality of bank lending. We combine the universe of recipient firms under the Improvement of Regional Economic Structures program (GRW) with their local banks during 1998-2019. The modalities of GRW subsidies to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more subsidized firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn, borrow more indicating that banks facilitate regional economic development policies.
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The German Model of Industrial Relations: Balancing Flexibility and Collective Action
Simon Jäger, Shakked Noy, Benjamin Schoefer
Journal of Economic Perspectives,
No. 4,
2022
Abstract
We give an overview of the "German model" of industrial relations. We organize our review by focusing on the two pillars of the model: sectoral collective bargaining and firm-level codetermination. Relative to the United States, Germany outsources collective bargaining to the sectoral level, resulting in higher coverage and the avoidance of firm-level distributional conflict. Relative to other European countries, Germany makes it easy for employers to avoid coverage or use flexibility provisions to deviate downwards from collective agreements. The greater flexibility of the German system may reduce unemployment, but may also erode bargaining coverage and increase inequality. Meanwhile, firm-level codetermination through worker board representation and works councils creates cooperative dialogue between employers and workers. Board representation has few direct impacts owing to worker representatives' minority vote share, but works councils, which hold a range of substantive powers, may be more impactful. Overall, the German model highlights tensions between efficiency-enhancing flexibility and equity-enhancing collective action.
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The Gender Reveal: The Effect of Sons on Young Fathers’ Criminal Behavior and Labor Market Activities
Kabir Dasgupta, André Diegmann, Tom Kirchmaier, Alexander Plum
Labour Economics,
October
2022
Abstract
Based on New Zealand’s administrative court charges data, we document child gender-specific differences in future criminal behavior of young fathers. The deterrent impact of having a son on the future likelihood of receiving convictions persists for as long as ten years post-childbirth. Utilizing population-wide monthly tax registers and Census data, we provide key insights into the role model hypothesis. We show that young fathers with a son have (i) a higher likelihood of being in employment, (ii) higher wages and salaries, (iii) lower benefit dependency, (iv) better qualification, and (v) a higher likelihood of being in a partnered relationship.
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Business Cycle Characteristics of Mediterranean Economies: a Secular Trend and Cycle Dynamics Perspective
Anna Solms, Bernd Süssmuth
International Economics and Economic Policy,
October
2022
Abstract
This study analyzes business cycle characteristics for all 20 major contemporaneous economies bordering the Mediterranean Sea based on annual real gross domestic product series for the period from 1960 to 2019. The region we investigate corresponds to the Mare Internum region of the Imperial Roman Empire during the Nerva-Antonine and early Severan dynasty, i.e., at the time of the maximum extent of the Roman Empire around 100 to 200 CE. The covered area encircles the Mediterranean, including economies now belonging to the European Union as well as acceding countries, Turkey, and the Middle East and North African economies. Using a components-deviation-cycle approach, we assess level trends and relative volatility of output. We also quantify the contribution of various factors to the business cycle variability within a region. We find cyclic commonalities and idiosyncrasies are related to ancient and colonial history and to contemporaneous trade relationships. Caliphate and Ottoman Empire membership as well as colonial rule in the twentieth century and contemporary Muslim share of population are the most promising predictors of business cycle commonalities in the region.
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BigTech Credit, Small Business, and Monetary Policy Transmission: Theory and Evidence
Yiping Huang, Xiang Li, Han Qiu, Dan Su, Changhua Yu
IWH Discussion Papers,
No. 18,
2022
Abstract
This paper provides both theoretical and empirical analyses of the differences between BigTech lenders and traditional banks in response to monetary policy changes. Our model integrates Knightian uncertainty into portfolio selection and posits that BigTech lenders possess a diminishing informational advantage with increasing firm size, resulting in reduced ambiguity when lending to smaller firms. The model suggests that the key distinction between BigTech lenders and traditional banks in response to shifts in funding costs, triggered by monetary policy changes, is more evident at the extensive margin rather than the intensive margin, particularly during periods of easing monetary policy. Using a micro-level dataset of small business loans from both types of lenders, we provide empirical support for our theoretical propositions. Our results show that BigTech lenders are more responsive in establishing new lending relationships in an easing monetary policy environment, while the differences in loan amounts are not statistically significant. We also discuss other loan terms and the implications of regulatory policies.
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