Choosing and using payment instruments: evidence from German microdata

Germans are still very fond of using cash. Of all direct payments transactions in 2008, cash accounted for an astounding 82 % in terms of number and for 58 % in terms of value. With a dataset that combines transaction information with survey data on payment behaviour of German consumers, we shed light on how individuals decide on their cash usage. We employ a two-stage empirical framework which jointly explains payment card ownership and the use of cash. Our results indicate that cash usage is compatible with systematic economic decision making. Consumers decide on the adoption of payment cards and then use available payment media according to transaction characteristics, the relative costs of cash and card usage, socio-demographic characteristics and their assessment of payment instruments’ characteristics. Importantly, older consumers use significantly more cash than younger consumers. We show that this difference in payment behaviour is not attributable to age as such but largely to differences in the characteristics of older and younger consumers. This suggests that the high cash intensity of older consumers cannot fully be attributed to the role of habit or to their slow adoption to new payment technologies.     

German bond markets and US monetary policy

Low interest rates have been a major problem for the European life insurance industry. The implementation of Solvency II certainly has forced European life insurers to improve their risk management procedures and to buy long term bonds in order to handle the interest rate risk inherent to their liabilities. As a consequence, the industry meanwhile more or less seems to be able to cope with the problem of low interest rates. However, now the US central bank has started to hike rates. The Bank of Canada meanwhile has followed its southern neighbor. The changed monetary policy environment in North America might create new challenges for asset managers in the European life insurance industry. This paper provides some additional thoughts and empirical evidence about the linkages between US monetary policy and the European bond market employing techniques of time series analysis.     

Economic Effects of Taxing Different Organizational Forms under the Nordic Dual Income Tax

This paper analyzes the economic effects of income splitting rules for closely held corporations and sole proprietorships/partnerships under the Nordic dual income tax. Income is split by imputing a return to capital, but the methods used for this differ between the Nordic countries. With a few notable exceptions, income splitting does well in the sense that the cost of capital is approximately the same in closely and widely held corporations. The special tax rules for sole proprietorships/partnerships manage to neutralize the impact of the high labor income tax on the cost of capital.     

Heterogeneous treatment effects: Instrumental variables without monotonicity?

Imbens and Angrist (1994) were the first to exploit a monotonicity condition in order to identify a local average treatment effect parameter using instrumental variables. More recently, Heckman and Vytlacil (1999) suggested the estimation of a variety of treatment effect parameters using a local version of their approach. We investigate the sensitivity of the respective estimates to random departures from monotonicity. Approximations to the respective bias terms are derived. In an empirical application the bias is calculated and bias corrected estimates are obtained. The accuracy of the approximation is investigated in a Monte Carlo study.     

Geologisches Risikomanagement für Versicherungen

The application of Geoinformationsystems under geological, hydrological and hydrogeological aspects for the risk management is a further development of the geographical underwriting of the insurance industry. The knowledge of the geology, hydrology and hydrogeology is fundamental for the understanding and spatial analysis of insured objects before and during loss events for example with contaminations of the aquifer. Furthermore possible loss scenarios could be prevented or minimized if the subsurface geology and hydrogeology are already known and integrated in the initial insurance appraisal. The modelling and classification of the geoscientific knowledge also enables the definition of Action Zones, which allow a better appraisal and assessment of the insurable objects. This leads to an optimized and transparent premium calculation for both, the insurance and the policyholder (Münchener Rück 2002). The visualization of the geoscientific subsurface information in Geoinformationsystems is simple and economical feasible, it is quick to analyze and combinable with additional information and gives important insights in the subsurface structures. The paper describes a workflow how such Action Zones could be assessed and the additional information for the premium is generated.