Offshore Outsourcing

The offshore outsourcing of IT services has become increasingly important for the global IT industry and is creating new uncertainties for the IT workforce in the USA and Western Europe. It is easy to overestimate the benefits of offshore outsourcing, however, if only wage cost differentials are taken into account and the many hidden costs are ignored. The following article discusses the advantages and risks involved in the different phases of offshore projects and presents some conclusions with regard to prospects.

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*Senior Researcher, German Institute for Economic Research, Berlin, Germany.

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**Research Assistant, German Institute for Economic Research, Berlin, Germany.     

Expectations on the yen/dollar exchange rate – Evidence from the Wall Street Journal forecast poll

We use the foreign exchange forecasts of the Wall Street Journal poll to analyze forecasters’ expectation formation process for the yen against the US dollar for the period 1989–2007. We also contrast the expectation formation process with the actual exchange rate process. We find that most forecasters have contrarian and stabilizing exchange rate expectations. Our results also indicate significant heterogeneity between forecasters. However, forecasters on average underestimate the degree of contrarian and stabilizing behavior.     

Inefficient arbitrage in inter-regional electricity transmission

This paper analyzes the efficiency of an explicit ex ante auction for network access to facilitating trade between two separate, but linked, electricity wholesale markets. It is generally assumed that greater regional interconnection will mitigate the exercise of local market power by dominant generators, but we show analytically that when a dominant player has access to a more competitive neighboring market, and is also the lowest cost producer, the exercise of market power becomes attractive and can have negative consumer welfare implications. For an empirical analysis, we use a unique data set of daily company-level flow nominations on the Anglo-French Interconnector (IFA). This provides a clear case study, “free of loop flows” (with the IFA being the only link between the UK and France). We are able to identify evident inefficiencies in the market behavior, for which several explanations, including market power, may contribute.     

Nahrungssicherheit und Agrarspekulation: Was ist politisch zu tun?

This short essay on financial speculation with agricultural commodities offers (1) a survey on the real economy factors that caused recent hunger crises, (2) an overview of the academic research on the impact of index-based financial speculation on agricultural markets, and (3) a discussion of political measures that are appropriate — or inappropriate — for improving global food security.     

Morality or economic interest? The impact of moral motives and economic factors on the purchase of fair trade groceries

In this article, we compare the impact of moral motives and economic factors on the purchase of fair trade groceries. Moral motives are measured by three different constructs, which are derived from different theoretical perspectives: one from the classical theory of attitude, one from the subjectively expected utility theory and one from the norm‐activation model. The empirical results of the analysis show that moral motives as well as economic factors are important determinants for explaining the purchase of fair trade groceries. Furthermore, the study indicates that the impact of moral motives is greater than that of economic factors, and among the moral factors, the personal norm is especially explanatorily powerful.     

Telco business models at a crossroads

The goals of the Digital Agenda for Europe are far from being achieved, and the measures taken so far have not proven to be sufficiently effective in order to attain European infrastructure and investment targets in a timely manner. Without adequate investment in telecommunications infrastructure, Europe will lose competitiveness compared to the digitally better-equipped world. This article proposes new funding opportunities as well as a number of policy measures to foster investment in electronic communications infrastructure in order to encourage digital modernisation and thus to enhance the EU’s international competitiveness.