The Home Bias in Equities and Distribution Costs

We show that incorporating distribution costs into a general equilibrium model of international portfolio choice helps to explain the home bias in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if agents have an incentive to hedge labor income risk by purchasing foreign equity. This is because the existence of a retail sector affects both the correlation of domestic returns with the domestic price level and the correlation between financial and non‐financial income.     

Service innovation as a political process

Service innovation processes are driven by stakeholders in interaction and are understood and sketched as a value negotiation process that consists of an iterative process of securing potential value in service. While previous research has focused on service innovation as a harmonious closed system, our study explores service innovation as a political process in which stakeholders negotiate to create and secure future value. Data are collected through interviews and participant observations in four different case studies. Our study contributes to the field by illuminating service innovation as a political process and explaining how this is operationalized. The findings also contribute to an understanding of how stakeholder resources impact a chosen strategy; the resulting strategy’s impact on the service concept vis-à-vis its potential value; and how several involved stakeholders formulate, negotiate, and secure future potential value, which are the activities that drive a service innovation process.     

Die Auswirkungen der Finanzkrise sowie von Solvency II auf <Emphasis Type="Italic">Insurance-linked Securities</Emphasis>

Der Beitrag stellt Insurance-linked Securities (“ILS”) als Instrument des alternativen Risikotransfers dar und grenzt ILS von anderen Instrumenten des alternativen Risikotransfers ab.     

Reanalyzing Zero Returns to Education in Germany

Pischke and von Wachter (Review of Economics and Statistics 2008; 90 (3): 592–598) find zero earnings returns to compulsory schooling in the basic school track in Germany. We reanalyze their study using a different dataset. In an extension, we use additional instruments which allow estimation of heterogeneous effects for different groups of compliers. We can confirm the previous result and also find zero returns for other compliers in higher track schools. Moreover, we do not find a causal effect of schooling on cognitive skills. This is in line with a potential reason Pischke & von Wachter (2008) give for their result, namely that basic skills are learned earlier in Germany and additional years of schooling are no longer effective. Copyright © 2015 John Wiley & Sons, Ltd.     

Tax competition and the political economy of public employment: a model for Austria

In this work, we simulate the effects of the tax autonomy of the Austrian states on the levels of public employment in each state. We show that depending on the strength of the public sector lobby, tax autonomy would require a reduction of employment in the public sector of between 25 and 35% of the current level. We also show that tax autonomy increases welfare levels by 1–1.5%; that is, the positive change in the disposable income of the workers more than offsets the welfare loss resulting from the lower provision of public goods. Finally, we show that the reduction of public employment is superior in terms of welfare to an alternative scenario in which employment levels are held constant but the wage levels in the public sector are adjusted.     

Decomposing the Ins and Outs of Cyclical Unemployment

This paper analyses the contribution of the composition of the pool of employed and unemployed individuals to labour market dynamics in different phases of the business cycle. Using individual‐level data from the Current Population Survey (CPS), we decompose differences in employment status transition rates between upswings and downturns into explained and unexplained parts. We find that the duration of unemployment contributes to explaining unemployment outflows to employment and observe that its initially positive contribution turns negative in deep recessions. Composition effects play an important role for unemployment outflows to non‐participation but dampen the cyclicality of unemployment inflows from employment.     

Kapitalbeteiligung im 21. Jahrhundert: Antwort auf Thomas Piketty

This white paper discusses an aspect that seems to be missing in the debate about Piketty’s “Capital in the 21st Century”: to build the bridge between capital and labour and to spread capital investment over a wide base. Based on historical data, it shows that capital participation could be a realistic option for Germany and for all of Europe. It would therefore be an alternative to the redistribution of wealth suggested by Thomas Piketty, and it would fit very well into the current debate about additional improvements to the private pension system in Germany. Calculations prove that if European employees had contributed small amounts of money to saving plans, they could own approximately 50% of the European stock market. Employees could become capital owners. Labour income could be–at least partly–replaced by capital income.