Contracting with Heterogeneous Externalities
Shai B. Bernstein, Eyal Winter
American Economic Journal: Microeconomics,
No. 2,
2012
Abstract
We model situations in which a principal offers contracts to a group of agents to participate in a project. Agents' benefits from participation depend on the identity of other participating agents. We assume heterogeneous externalities and characterize the optimal contracting scheme. We show that the optimal contracts' payoff relies on a ranking, which arise from a tournament among the agents. The optimal ranking cannot be achieved by a simple measure of popularity. Using the structure of the optimal contracts, we derive results on the principal's revenue extraction and the role of the level of externalities' asymmetry.
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Do Government Owned Banks Trade Market Power for Slack?
Andreas Hackethal, Michael Koetter, Oliver Vins
Applied Economics,
No. 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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Do Women Benefit from Competitive Markets? Product Market Competition and the Gender Pay Gap in Germany
Boris Hirsch, Michael Oberfichtner, Claus Schnabel
Economics Bulletin,
No. 2,
2012
Abstract
Using a large linked employer–employee dataset for Germany with a direct plant-level measure of product market competition and controlling for job-cell fixed effects, we investigate whether relative wages of women benefit from strong competition. We find that the unexplained gender pay gap is about 2.4 log points lower in West German plants that face strong product market competition than in those experiencing weak competition, whereas no such link shows up for East Germany.
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The Structural Determinants of the US Competitiveness in the Last Decades: A 'Trade-Revealing' Analysis
Massimo Del Gatto, Filippo di Mauro, Joseph Gruber, Benjamin Mandel
ECB Working Paper,
No. 1443,
2012
Abstract
We analyze the decline in the U.S. share of world merchandise exports against the backdrop of a model-based measure of competitiveness. We preliminarily use constant market share analysis and gravity estimations to show that the majority of the decline in export shares can be associated with a declining share of world income, suggesting that the dismal performance of the U.S. market share is not a sufficient statistic for competitiveness. We then derive a computable measure of country-sector specific real marginal costs (i.e. competitiveness) which, insofar it is inferred from actual trade ows, is referred to as 'revealed'. Brought to the data, this measure reveals that most U.S. manufacturing industries are losing momentum relative to their main competitors, as we find U.S. revealed marginal costs to grow by more than 38% on average. At the sectoral level, the "Machinery" industry is the most critical.
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What Drives Innovation Output from Subsidized R&D Cooperation? — Project-level Evidence from Germany
Michael Schwartz, Michael Fritsch, Jutta Günther, François Peglow
Technovation,
No. 6,
2012
Abstract
Using a large dataset of 406 subsidized R&D cooperation projects, we provide detailed insights into the relationship between project characteristics and innovation output. Patent applications and publications are used as measures for the innovation output of an R&D project. We find that large-firm involvement is strongly positively related with the number of patent applications, but not with the number of publications. Conversely, university involvement has positive effects on projects’ innovation output in terms of the number of publications but not in terms of patent applications. In general, projects’ funding as measure of projects’ size is an important predictor of the innovation output of R&D cooperation projects. No significant effects are found for the number of partners as (an alternative) measure of projects’ size, for spatial proximity between cooperation partners, for the involvement of a public institute for applied research, and for prior cooperation experiences. We derive conclusions for the design of R&D cooperation support schemes.
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Fiscal Policy and the Great Recession in the Euro Area
Mathias Trabandt, Günter Coenen, Roland Straub
American Economic Review: Papers and Proceedings,
No. 3,
2012
Abstract
How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.
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The Impact of Psychic Distance on Subsidiary Autonomy - Theory and Evidence from Central and Eastern European Countries
Gjalt de Jong, D. van Vo, Philipp Marek
Journal of International Management,
2012
Abstract
The key objective of this study is to determine whether or not psychic distance between home and host countries influences the decision-making autonomy of subsidiaries. Theoretical arguments for the relationship between psychic distance and subsidiary autonomy go in both directions with some predicting a negative relationship and others predicting a positive one. We test these conflicting hypotheses with a unique multi-country and multi-industry database reporting survey evidence of 809 subsidiaries located in five Central and Eastern European countries that serve headquarters in 44 different nation states. Psychic distance is a multidimensional construct and measured in terms of linguistic, religious, economic, institutional and geographic distance. The empirical results of 103 country pairs suggest that psychic distance – in terms of religious and economic distance – is positively related to autonomy.
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Protect and Survive? Did Capital Controls Help Shield Emerging Markets from the Crisis?
Makram El-Shagi
Economics Bulletin,
No. 1,
2012
Abstract
Using a new dataset on capital market regulation, we analyze whether capital controls helped protect emerging markets from the real economic consequences of the 2009 financial and economic crisis. The impact of the crisis is measured by the 2009 forecast error of a panel state space model, which analyzes the business cycle dynamics of 63 middle-income countries. We find that neither capital controls in general nor controls that were specifically targeted to derivatives (that played a crucial role during the crisis) helped shield economies. However, banking regulation that limits the exposure of banks to global risks has been highly successful.
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Crises, rescues, and policy transmission through international banks
Claudia M. Buch
Bundesbank Discussion Paper 15/2011,
2011
Abstract
The World Financial Crisis has shaken the fundamentals of international banking
and triggered a downward spiral of asset prices. To prevent a further meltdown of
markets, governments have intervened massively through rescues measures aimed at recapitalizing banks and through liquidity support. We use a detailed, banklevel dataset for German banks to analyze how the lending and borrowing of their foreign affiliates has responded to domestic (German) and to US crisis support schemes. We analyze how these policy interventions have spilled over into
foreign markets. We identify loan supply shocks by exploiting that not all banks
have received policy support and that the timing of receiving support measures
has differed across banks. We find that banks covered by rescue measures of the
German government have increased their foreign activities after these policy
interventions, but they have not expanded relative to banks not receiving support.
Banks claiming liquidity support under the Term Auction Facility (TAF) program
have withdrawn from foreign markets outside the US, but they have expanded
relative to affiliates of other German banks.
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