A new look at the relationship between time-series and structural econometric models

This paper examines the relationship between dynamic structural econometric models (SEM) and time series (TS) models. It extends the work of others by suggesting a reconciliation of SEM and TS models based on classical linear parameter restrictions in regression models rather than on time series methods. The paper demonstrates that in a number of common economic contexts there exist sets of plausible restrictions on the stochastic properties of the disturbances and on the dynamic adjustment processes in a SEM such that familiar structural models take on the form of univariate TS models. Consequently, it is argued that TS models should not be arbitrarily dismissed as being devoid of economic content.     

Box-Jenkins Methoden — Alternative Verfahren zur Prognose ökonomischer Zeitreihen

Summary In this paper we try to clarify whether the use ofBox-Jenkins methods would have improved the forecasting performance in Austria during the recession of 1975. For this purpose we estimate ARIMA models for gross national product, private consumption, investment in plant and equipment, and inventory investment. We then compare the forecasts derived from these models with the results of more convential forecasting techniques. It can not be expected that Box-Jenkins methods predict a business cycle turning point. But, as soon as the recession was under way Box-Jenkins methods were faster in adapting to the new situation than conventional forecasting techniques. We found that the accuracy of Box-Jenkins predictions depends to a large extent on the length of the forecasting horizon. Our results suggest that the forecasting horizon should not exceed one year. All in all, Box-Jenkins methods applied together with the forecasting techniques already in use could further improve the forecasting performance.     

Life cycle saving: Insights from the perspective of bounded rationality

This paper provides a new life cycle model that takes into account key elements of bounded rationality. The paper shows that the model can account for patterns in the data that are hard to explain by the standard life cycle model. Among other patterns, the model predicts that, typically, the young either hold no equity or their equity portfolio share is rather low and then increases over working life. The analytical solution of the model demonstrates its high degree of tractability.     

Austrian exporters: unique or alike? New insights and missing puzzle pieces

In this paper we provide detailed evidence on the performance of exporters compared to non-exporters in Austrian manufacturing industries based on firm-level data. The centrepiece of the study is the issue of the export premium, i.e. the size and productivity advantages of exporting firms compared to their purely domestic peers. We present evidence for the existence of sales, labour productivity and wage premia. These results are largely in line with the results found for other European countries. Furthermore we document the existence of large differences in these premia across industries and provide explanations for this finding. Our results are robust with regards to including additional firm control variables such as employment and R&D-related variables though the magnitudes of the export premia become much smaller. We also propose a new interpretation of the export premium estimation with firm fixed effects which we interpret as a result on export switchers. Finally, we employ a probit model to document the importance of sunk export costs for the decision to export.     

Die falschen Angriffe auf das Ehegattensplitting

These articles debate the pros and cons of the full income-splitting tax procedure. Ernst Niemeier defends this taxation scheme, because in his opinion it is not aimed at furthering families or children but making sure that a couple does not have to pay more taxes than two singles. He argues that there are constitutional reasons to treat equal incomes equally, which he refers to as “horizontal justice”. Furthermore, he rejects evidence of a negative labour supply effect on the second earner. A team of authors at the DIW find his argumentation not at all convincing. First, they say, determining tax justice or ability to pay is ultimately a political question and cannot be determined by scientists or the courts. Thus, a constitutional determination of marriage taxation on the existing full income-splitting procedure is excessive. Second, the empirical evidence of negative labour supply effects of full income splitting for the second earner can simply not be denied. Niemeier argues why such supply effects cannot exist.     

Bidding for Firms with Unknown Characteristics

When a region successfully attracts a firm by offering subsidies, the firm often commits itself to performance targets in terms of employment. In this paper, we interpret these firm‐specific targets as a consequence of incomplete information. We analyze a model of two regions that compete for a firm, assuming that the firm's productivity is ex ante unknown. We show that performance targets often induce overemployment in high‐productivity firms, and that tax credits are often superior to lump‐sum payments. Moreover, when regions differ in wage rates, the low‐wage region wins the bid and has a higher surplus than under complete information. Finally, we show that, under incomplete information, bidding might not lead to efficient firm location.