Spartengewerkschaften auch in Wettbewerbsbereichen unterbinden

Craft unions are trade unions which represent a specific professional branch of the workforce. The German Constitutional Court is currently examining a new law which would more or less stop their activities. This paper argues in favour of such restriction, not only in protected sectors with price regulation, public bail outs, etc. (as a previous paper did), but also in competitive sectors of the economy like airlines. The reason is that craft unions abuse monopolistic bottlenecks to siphon off economic rents at the cost of their colleagues, which simultaneously hurts efficiency and equity. Moreover, there is no indication that these adverse incentives diminish over time.     

Regulating harmless activity to fight crime

This paper establishes that regulating harmless activity can be an effective instrument of law enforcement when the harmless activity and the harmful activity are interdependent. This type of regulation is not without cost, as it distorts the individual choices made by both law-abiding and non-law-abiding individuals. However, it can be socially advantageous when the impact on welfare resulting from changes in the choices of offenders dominates the impact of changes in non-offenders’ decisions; in addition, increasing deterrence by other means (such as raising the probability of detection or the magnitude of sanctions) can incur much higher costs.     

Firm Productivity and the Foreign‐Market Entry Decision

We use Japanese firm‐level data to examine how a firm’s productivity affects its foreign‐market entry strategy. The firm faces a choice between exporting and foreign direct investment (FDI). In the case of FDI, the firm has two options: greenfield investment or acquisition of an existing plant (M&A). If it selects greenfield investment, it has two ownership choices: whole ownership or a joint venture with a local company. Controlling for industry‐ and country‐specific characteristics, we find that the more productive a firm is, the more likely it is to choose FDI rather than exporting and greenfield investment rather than M&A.     

On the evasion of employment protection legislation

This paper analyzes how the option to evade employment protection legislation impacts on unemployment. Using a stylized model, it is established that the level of unemployment is non-monotonous in the degree of strictness with which employment protection legislation is enforced. Considering just cause and social criteria requirements for three regulatory regimes representative of a large number of industrialized countries, we find that different regimes generate different dismissal decisions only if the regimes are strictly enforced. In contrast, unemployment rates may differ across regimes even in the case of weak enforcement. Additionally, we find that it may be worse for the economy to weakly enforce harmful regulations than to strictly enforce them.     

Beating the market? A mathematical puzzle for market efficiency

The efficient market hypothesis is highly discussed in economic literature. In its strongest form, it states that there are no price trends. When weakening the non-trending assumption to arbitrary short, small, and fully unknown trends, we mathematically prove for a specific class of control-based trading strategies positive expected gains. These strategies are model free, i.e., a trader neither has to think about predictable patterns nor has to estimate market parameters such as the trend’s sign like momentum traders have to do. That means, since the trader does not have to know any trend, even trends too small to find are enough to beat the market. Adjustments for risk and comparisons with buy-and-hold strategies do not satisfactorily solve the problem. In detail, we generalize results from the literature on control-based trading strategies to market settings without specific model assumptions, but with time-varying parameters in discrete and continuous time. We give closed-form formulae for the expected gain as well as the gain’s variance and generalize control-based trading rules to a setting where older information counts less. In addition, we perform an exemplary backtesting study taking transaction costs and bid-ask spreads into account and still observe—on average—positive gains.