Enlargement and Institutional Reform in the European Union: Separate or Connected Issues?

In this paper, I analyze how the enlargement process is connected to the currently proposed institutional reforms in the European Union. Although the official claim is that enlargement requires reform, the relationship between both processes needs clarification. The use of unanimity voting for policy issues leads to substantial deadlock in the current Union, a problem that could be solved by the introduction of (qualified) majority voting. Moreover, in view of its current inflexibility enlargement would only marginally decrease the Union's capacity to make decisions. Under qualified majority rule, enlargement is likely to have little or no effect on flexibility given the distribution of preferences of the member-states. Also, if qualified majority voting is used, enlargement would decrease the power of the current member-states in a future Union, especially the larger ones. This, and the possibility for current member-states to link enlargement with specific policy demands, could be the crucial factors in the timing and shaping of the enlargement process.     

Financialisation and Real Investment in the European Union: Beneficial or Prejudicial Effects?

This article presents an empirical analysis of the relationship between financialisation and real investment for non-financial corporations using panel data composed of 27 European Union countries over 19 years (1995 to 2013). On the one hand, financialisation leads to a rise in financial investments, diverting funds from real investments (‘crowding out’ effect); on the other, pressures from shareholders to intensify financial payments restrict the funds available for new real investments. We estimate an aggregate investment equation with the traditional variables (lagged investment, profitability, debt, cost of capital, corporate savings and output growth) and two further measures of financialisation (financial receipts and financial payments). The findings demonstrate that financialisation has damaged real investment in European Union countries, mainly through the channel of financial payments, either by interest or dividend payments. It is also found that the prejudicial effects of financialisation on investment were more severe in the pre-2007 crisis period. It is concluded that financialisation contributed to a slowdown of real investment by 1 to 8 per cent in the full and pre-crisis period, respectively. During the pre-crisis period, financialisation was the main driver of the slowdown of investment in the European Union.     

Deposit guarantee reform in Europe: does European deposit insurance scheme increase banking stability?

The financial crisis led to reforms of regulation and supervision in Europe, including Deposit Guarantee Schemes. The new rules for DGSs define their position and interaction within the safety net. DGSs form part of a system to maintain and enhance financial stability. According to the Five Presidents’ Report a European Deposit Insurance Scheme should be the third pillar of the Banking Union. The paper gives a contribution to the on-going debate providing an assessment of the DGSs reform and its evolution towards EDIS. It explains key elements of the new rules for DGSs putting them in a systemic perspective.     

Measuring inefficiency in the presence of bad outputs: Does the disposability assumption matter?

Multiple approaches to incorporate environmental pollution in production technologies have been proposed. In this paper, we analyze the consequences of these theoretical models for applied research. Our comparison focuses on alternative disposability assumptions imposed on bad outputs and their effects on the measurement of productive efficiency. Using empirical data on electricity generation in the US, we quantify and analyze differences among the theoretical models. Moreover, Monte Carlo simulations are conducted to evaluate the ability of the models to correctly estimate inefficiency given varying specifications of the pollution-generating process.     

Concentration and Multinationality in European Manufacturing: What’s the Effect on Productivity?

Using the time comparable matrix data from Sleuwaegen and Veugelers (2001), this paper investigates the impact of concentration and intra-EU distribution of multinational production on productivity growth in European manufacturing. In line with previous research, our estimation results indicate that market structure is indeed an important determinant. Productivity growth is significantly reduced through increasing concentration, while it is increased in industries with growing competitive pressure, e.g. from import penetration. The increasing intra-EU dispersion of multinational production likewise fosters productivity growth: Multinational firms promote technological change and transfer their firm-specific assets across countries.JEL codes: L11, F23     

Collective Influence on Information Technology in Virtual Organizations-Emancipatory Management of Technology?

This contribution addresses the question of how to create an agency for emancipatory management of technology. Unions are suggested as a collective actor, since steps towards democratization and micro emancipation have few chances if they rely on management practitioners alone. Instead, unions, shop stewards and employees should acquire and demand elements of emancipatory management of technology on the basis of collective power rather than waiting for managers to change their praxis. The article looks at union activities related to virtual organizations in manufacturing companies. It is argued that although virtualization is modest, it still challenges traditional union strategies. Based on case material stemming from action-oriented research, a number of levels of possible influence and politicization are discussed ranging from the workplace to the national level, which unions can pursue in becoming a collective actor in the development of ICT and organizations.     

Do banking system transparency and competition affect nonperforming loans in the Chinese banking sector?

The increasing importance of transparency practices and the improving status of bank competition in China are rarely explored in nonperforming loans (NPLs) literature. Thus, the purpose of this study is to examine banking system transparency and competition along with macroeconomic and bank-specific variables as determinants of NPL. We use the two-step system GMM dynamic panel model for Chinese banks based on annual data from 2000 to 2014. Our results indicate that high transparency in the Chinese banking system decreases poor-quality assets but not in the case of government-owned banks, whereas increase in competition increases NPL. Moreover, we find mixed results in the context of macroeconomics and bank-specific variables. Our study has practical implications in risk management practices and macro prudential policies.     

Does the BRRD affect the retail banking business model in the Euro area?

This paper discusses how the introduction of the Banking Recovery and Resolution Directive (BRRD) in European Union legislation may change the retail banking business model, which is the most prevalent model in Southern European countries. The main point is the treatment of deposits in the BRRD. Uninsured deposits may be written down or converted into equity in case of resolution of a bank. This contrasts with the treatment of other short-term liabilities, in particular repurchase agreements. Short maturity repos are excluded from the bail-in, regardless of their size. Also, liabilities related to securities lending and derivatives are given privileged treatment. It is argued that this will be an advantage for wholesale and investment banks, which use these types of short-term funding largely to finance asset purchases. Moreover, it will severely hit retail banking business models of various types by undermining the trust of depositors in the bank, causing bank runs whenever rumours circulate about financial distress situations, thus increasing its cost of funding and lowering the value of its shares. Therefore, to avoid runs on repos, runs on banks are resurging.     

What is really common in the run-up to banking crises?

Arguing that crises are similar if they are predictable from historical experience, we employ panel logit models to examine similarities in the run-ups to the current global financial crisis and historical banking crises. Asset bubbles are the most common precursors.     

Rhetoric on the economy: have European parties changed their economic messages?

This study analyses the determinants of dispersion of economic issue mentions in European party manifestos. We examined three main economic domains (governmental control of the economy, free market capitalism and support for the welfare state) as consequences of globalization forces, economic conditions, partisanship and electoral turnout. Employing aggregate-level Comparative Manifesto Project (CMP) data from legislative elections in 15 European countries from 1970 to 2010, we confirm that parties hold a common view of the salience of economic control of the state as a consequence of globalization pressure and economic growth levels. Partisanship of the cabinets (regardless of the political orientation) counteracted issue salience concentration in the welfare domain. Government size favoured dispersion in the free market realm. Our results do not indicate clear homogenization of parties’ economic messages in elections over the last 40 years.     

Environmental policy in the European Union: Fostering the development of pollution havens?

A pollution haven occurs when dirty industries from developed nations relocate to developing nations in order to avoid strict environmental standards or developed nations imports of dirty industries expand replacing domestic production. The purpose of this study is to determine whether the European Union (EU) has increased its imports of “dirty” goods from poorer, less democratic countries during a period of more stringent environmental standards. Previous empirical studies such as those by Levinson and Taylor [Levinson, A., and Taylor, M.S., in press. Unmasking the Pollution Haven Effect. International Economic Review.], Ederington, Levinson and Minier [Ederington, J., Levinson, A., and Minier, J., 2005. Footloose and Pollution-Free. Review of Economics and Statistics., 87: 92-99.], Kahn and Yoshino (2004), and Ederington and Minier [Ederington, J., and Minier. J., 2003. Is Environmental Policy a Secondary Trade Barrier? An Empirical Analysis. Canadian Journal of Economics., 36: 137-54.] find evidence that United States imports are responsive to changes in environmental stringency, but the effects of EU policy have not been examined as thoroughly. Our study follows Kahn [Kahn, M.E., 2003. The Geography of Us Pollution Intensive Trade: Evidence from 1958 to 1994. Regional Science and Urban Economics., 33: 383-400.] and examines the impact of industry energy intensity and toxicity, measured by an energy index and a Toxic Release Inventory (TRI) index, on imports into the EU, at the 2-digit industry level from 1970 to 1999. We use the signing of the Maastricht Treaty to signify a period of more uniform and stringent community wide environmental standards (1993-1999), and identify the level of per capita GDP within an EU trading partner. We find an increased amount of EU energy intensive trade with poorer countries during the period with more stringent EU environmental standards. This result is not robust, however, when poorer countries are defined by OECD membership and geographic region. We do not find an increased amount of EU toxic intensive trade with poorer countries although there is some evidence of increased EU imports of toxic goods from poorer OECD and non-EU European countries. For our full sample of trading partners in all regions, the evidence supports the PHH for EU energy intensive trade, but not for toxic intensive trade. Results for regional trade analysis are less clear.     

Did the global financial crisis alter the competitive conditions in the Indian banking industry?

This article addresses a pertinent research question: Did the global financial crisis alter the competitive conditions in the Indian banking industry? In order to find the answer of this research question, we applied a dynamic version of the non-structural Panzar-Rosse model on a unique unbalanced panel dataset of Indian banks spanning over the period from 1998/99 to 2015/16. The robust estimates of H-statistic computed on the basis of the generalized method of moments estimates of the elasticities of input prices show that (i) Indian banks earned their interest and total revenue under monopolistic competition throughout the whole of the sample period and (ii) the global financial crisis altered the competitive conditions in the banking industry, and market moved closer to perfect competition following the financial crisis, especially when interest-bearing activities were in focus.     

Convergence,divergence, or multiple steady states? New evidence on the institutional development within the European Union

Convergence in institutions and in per capita income across the European Union (EU) Member States are key goals of the European integrations process. Especially in the course of the various EU enlargement waves starting in 2004, it was intensively discussed whether institutional and structural homogeneity are necessary preconditions for real convergence and the smooth functioning of the EU or whether a (further) catching up in the institutional and economic development will endogenously occur after the EU accession. Our paper is dedicated to the analysis of these institutional dynamics within the EU. In particular, we analyze the formation of institutional convergence clusters using Phillips and Sul's (2007, 2009) log t-test over the period 2002 to 2018. Our results indicate the existence of multiple institutional clubs with various countries being stuck in a poor institutional trap. Moreover, we find that institutional convergence clubs are formed mainly on the basis of geographic region; in particular, we identify a northwest-southeast divide. When analyzing per capita income clubs, a rather similar picture emerges, suggesting that the underlying institutional clusters might drive the formation of income clubs. We also study the factors that determine institutional club membership by using an ordered probit model. Most importantly, we find that the initial levels of human capital and institutional quality are decisive for determining whether a country is on a high or low institutional growth path.     

Cost efficiency in Bangladesh banking: does financial reform matter?

This article estimates the cost efficiency of the commercial banks of Bangladesh in the context of financial reform. Employing the single-stage stochastic frontier analysis (SFA) model, the study uses a unique balanced panel data set comprising bank-level annual data from the dominant commercial banks in Bangladesh for the period 1983–2012. The results show that bank cost has fallen due to financial deregulation. Our results from the data envelopment analysis do not vary significantly that we obtained from the SFA. In addition, the presence of politically linked directors on the bank board has an adverse effect on efficiency. These findings suggest that further reforms aiming at removing all sorts of political influence should continue to ensure competitive environment in order to achieve cost efficiency in the financial sector of the country.     

Complements or substitutes? New theoretical considerations and empirical evidence on the imports and FDI relationship in Central and Eastern European Countries

This paper addresses the imperative need to understand the relationship between inward FDI and trade by developing a new conceptual approach and providing empirical evidence. We use an expanded time dataset, from 1992 to 2008 and an enriched dataset of countries, sectors and location factors. In regards to the inward FDI versus imports relationship, results comply with our theoretical formulation and strongly indicate an overall complementarity with each other. In the case of FDI we find strong locational characteristics such as the large market size, the gradual improvement of the macro-environment and finally the quality of labour force to play a positive role.     

Do Price Barriers Exist in the European Carbon Market?

It is generally thought that psychological prices in markets primarily traded by professional participants should play a limited role. The authors investigate the existence of key reference points in the European Carbon Market, which can be considered as a market with highly qualified stakeholders. They document the presence of key levels and barrier bands around European Union Allowances (EUA) prices. It appears that traders tend to consider these price levels as resistances in upward movements and as supports in downward movements. Furthermore, the authors have observed that the existence of price barriers affects both return and volume dynamics. Therefore, the results indicate that there exist certain EUA prices that do, in fact, modify the behavior of European Carbon Market participants.     

Effects of changes in outputs and in prices on the economic system: an input–output analysis using the spectral theory of nonnegative matrices

The (physical) output adjustment model and the price adjustment model are presented. By the two models we quantitatively analyze the influences of alterations of one sectoral (physical) gross output and of one sectoral price on another sectoral (physical) gross output and on another sectoral price, respectively. Hence, a basic nature of the Ghosh inverse and a fundamental character of the monetary Leontief inverse are obtained. The proposition that a matrix of intermediate output (input) coefficients alters if the vector of output (price) adjustment coefficients is nontrivial holds, if and only if this matrix is C-irreducible. It is impossible that (i) the adaptation of output system causes all sectoral final output rates (or input multipliers) either to rise or to fall collectively, or (ii) an adjustment of price system causes all sectoral value-added rates (or output multipliers) either to increase or to decrease jointly. However, maybe (i) a change of output system enables some sectoral final output rates (or input multipliers) to rise (fall) and all others to be constant, and (ii) an alteration of price system enables some sectoral value-added rates (or output multipliers) to increase (decrease) and all others to be fixed, whose necessary and sufficient condition is that the matrix of intermediate output (or input) coefficients has at least one non-final (or non-initial) class. The proposition that the vector of final output rates (or input multipliers) changes if the vector of output adjustment coefficients is nontrivial is true, if and only if the matrix of intermediate output coefficients has only one final class. The proposition that the vector of value-added rates (or output multipliers) alters if the vector of price adjustment coefficients is nontrivial holds, if and only if the matrix of intermediate input coefficients has only one initial class. The necessary and sufficient conditions and the matching economic explanations for possibility and uniqueness of the economic adjustment that enables (i) all sectors to have a uniform final output rate (or input multiplier), and (ii) all sectors to have the same value-added rate (or output multiplier) are respectively given. I would like to thank an anonymous referee for helpful comments and suggestions.