Distance and International Banking
Claudia M. Buch
Review of International Economics,
No. 4,
2005
Abstract
This paper asks how important distance is as a determinant of international banking and whether distance has become less important over time. If technological progress has lowered information costs and if information costs increase in distance, the importance of distance should have declined. I use data on assets and liabilities of commercial banks from five countries (France, Germany, Italy, UK, and US) in 50 host countries for the years 1983–99 to test this hypothesis. Generally, I find that banks hold significantly lower assets in distant markets and that the importance of distance for the foreign asset holdings of banks has not changed.
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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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An analysis of household electricity price developments in Germany since liberalization
Christian Growitsch, Felix Müsgens
Externe Publikationen,
2005
Abstract
Despite the liberalization of energy markets in 1998, household electricity prices in 2004 are nearly the same as 1998, indicating a failure of market restructuring. However, such a general consideration is misleading for two main reasons. Firstly, the price development shows significant differences among the stages of the value chain. Secondly, the underlying cost structure might have changed from 1998 to 2004. While such effects can be expected to level out over time, they can distort the comparison of a small period of observation. For these reasons, we analyzed the different price components at a detailed level, finding a considerable price reduction of about 32% in generation and a much lower reduction of 13% in transmission and distribution tariffs. These decreases have been mostly compensated by a significant increase in taxes and subsidies (+56%).
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Distance, Lending Relationships, and Competition
Hans Degryse, Steven Ongena
Journal of Finance,
No. 1,
2005
Abstract
We study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity. For our study, we employ detailed contract information from more than 15,000 bank loans to small firms comprising the entire loan portfolio of a large Belgian bank. We report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending. Loan rates decrease with the distance between the firm and the lending bank and increase with the distance between the firm and competing banks. Transportation costs cause the spatial price discrimination we observe.
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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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Cross-border bank mergers: What lures the rare animal?
Claudia M. Buch, G. DeLong
Journal of Banking and Finance,
No. 9,
2004
Abstract
Although domestic mergers and acquisitions (M&As) in the financial services industry have increased steadily over the past two decades, international M&As were until recently relatively rare. Moreover, the share of cross-border mergers in the banking industry is low compared with other industries. This paper uses a novel dataset of over 3000 mergers that took place between 1985 and 2001 to analyze the determinants of international bank mergers. We test the extent to which information costs and regulations hold back merger activity. Our results suggest that information costs significantly impede cross-border bank mergers. Regulations also influence cross-border bank merger activity. Hence, policy makers can create environments that encourage cross-border activity, but information cost barriers must be overcome even in (legally) integrated markets.
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Declining population and rising costs for municipal services
Peter Haug
Wirtschaft im Wandel,
No. 11,
2004
Abstract
Der Bevölkerungsschwund in vielen ostdeutschen Städten und Gemeinden hat nicht nur einen steigenden Gebäudeleerstand zur Folge, sondern verteuert auch die Versorgung mit leitungsgebundenen Versorgungsleistungen. Der Beitrag befasst sich daher am Beispiel der öffentlichen Trinkwasserver- und Abwasserentsorgung mit der empirischen Analyse der Abhängigkeit der Versorgungskosten pro Einwohner von der Bevölkerungszahl und -dichte. Dazu werden, anders als in vergleichbaren Studien, auf der Basis geeigneter betrieblicher Kostendaten die räumlichen Differenzen der Verteilungskosten pro Einwohner innerhalb einer Fallbeispielkommune ermittelt. Dabei stellt vor allem die Wahl der geeigneten räumlichen Schlüsselgröße ein zentrales Problem dar. Die Ergebnisse belegen die Kostenvorteile bei der Versorgung dichtbesiedelter Stadtteile mit netzgebundenen Leistungen. Als Konsequenz sollten unter anderem mögliche steigende Versorgungskosten pro Einwohner beim „Stadtumbau Ost“ stärker als bisher berücksichtigt werden.
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The Contestable Markets Theory - Efficient Advice for Economic Policy
Christian Growitsch, Thomas Wein
Externe Publikationen,
2004
Abstract
During the nineties of the last century several formerly monopolistic markets (telecommunication, electricity, gas, and railway) have been deregulated in Germany based on European directives and theoretically inspired by the theory of contestable markets. The original contestable market theory implied three assumptions necessary to be satisfied to establish potential competition: Free market entry, market exit possible without any costs, and the price adjustment lag exceeding the entry lag. Our analysis shows that if the incumbent reduces its prices slowly (high adjustment lag) and the market entry can be performed quickly (low entry lag), a new competitor will be able to earn back sunk costs. Therefore it is not necessary that all three conditions be complied with for potential competition to exist. Applying this „revised“ contestable market theory to the deregulated sectors in Germany, natural monopolies can be identified in telecommunication sections local loops and local/regional connection networks, in the national electricity grid and the regional/local electricity distribution networks, in the national and regional/local gas transmission/distribution sections, and in the railroad network. These sections are not contestable due to sunk costs, expected high entry lags and a probably short price adjustment lag. They are identified as bottlenecks, which should be regulated. The function of system operators in energy and railroad are closely related to the non-contestable monopolistic networks.
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The influence of Vertical Integration and Property Rights on Network Access Charges in the German Electricity Markets
Christian Growitsch, Thomas Wein
Externe Publikationen,
No. 6,
2004
Abstract
German Electricity markets were deregulated in the late nineties of the last century. In contrast to other European countries, the German government enacted negotiated third party access instead of installing a regulation authority. Network access charges for new competitors are based on contractual arrangements between energy producers and industrial consumers, which specify the calculation schemes for access charges. Local and regional suppliers are nevertheless able to set (monopolistic) charges at their own discretion, restricted only by the possibility of interference competition authorities. While some of those suppliers have been acquired by one of the four Transmission System Operators and become vertically integrated, the majority is still independent public utility companies. In this paper we analyse if there is evidence for different charging behaviour depending on the supplier’s economic independence or its level of vertical integration. Controlling for other coefficients as the so called structural features and related cost differences as well as the influence of competition law suits, multivariate estimations show significantly lower access charges than vertically separated suppliers, whereas incorporated network operators charge significantly higher charges compared to independent suppliers for at least one typical case.
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The Distance Puzzle: On the Interpretation of the Distance Coefficient in Gravity Equations
Claudia M. Buch, J. Kleinert, Farid Toubal
Economics Letters,
No. 3,
2004
Abstract
Although globalization has diminished the importance of distance, empirical gravity models find little change in distance coefficients. We argue that changing distance costs are largely reflected in the constant term. A proportional fall in distance costs is consistent with constant distance coefficients.
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