Optimal Gradual Annuitization: Quantifying the Costs of Switching to Annuities

We compute the optimal dynamic annuitization and asset allocation policy for a retiree with Epstein–Zin preferences, uncertain investment horizon, potential bequest motives, and pre‐existing pension income. In our setting the retiree can decide each year how much he consumes and how much he invests in stocks, bonds, and life annuities, while the prior literature mostly considered restricted so‐called deterministic or stochastic switching strategies. We show that postponing the annuity purchase is no longer optimal in the gradual annuitization (GA) case since investors are able to attain the optimal mix between liquid assets (stocks and bonds) and illiquid life annuities each year. In order to assess potential utility losses, we benchmark various restricted annuitization strategies against the unrestricted GA strategy.     

Building Relationships Early: Banks in Venture Capital

This paper examines bank behavior in venture capital. It considersthe relation between a bank's venture capital investments andits subsequent lending, which can be thought of as intertemporalcross-selling. Theory suggests that unlike independent venturecapital firms, banks may be strategic investors who seek complementaritiesbetween venture capital and lending activities. We find evidencethat banks use venture capital investments to build lendingrelationships. Having a prior relationship with a company inthe venture capital market increases a bank's chance of subsequentlygranting a loan to that company. Companies can benefit fromthese relationships through more favorable loan pricing.     

The Possibility of Industrial Policy

In this paper I shall outline and analyse the case for employing industrial policy in the pursuit of economic development, in the particular context of Sanjaya Lall's contributions in this area. The case for industrial policy rests on both a positive vision (the nature of technological knowledge and technological capabilities) and a normative vision (government capacity and the promotion of competitiveness). The case for industrial policy depends on establishing both its necessity and its possibility. Necessity is defined in terms of the nature of knowledge and technology, and its implications in terms of market failure; possibility is defined in the context of political economy, and in terms of the costs of discretionary policy interventions. The broader debate on industrial policy is framed in terms of these two dimensions. In particular, the possibility of a welfare-enhancing industrial policy is circumscribed by the ability to control the potential costs of discretionary government intervention. This ability is in turn a function of the political process and of “social capital”, a late concern of Lall's.     

Successfully selling accommodation packages at online auctions – The case of eBay Austria

In this era of e-commerce online auctions have emerged as a valuable distribution channel (36 and 52). Displaying low entry and exit barriers but also vast coverage rates, online auctions may effectively augment the distribution potential of hotel businesses. This paper identifies those factors that positively affect the final price level obtained in online auctions for hotel room vouchers. Based on data gathered at eBay comprising 53,406 auctions, linear structural equation modelling (SEM) was conducted to identify significant relationships between auction characteristics and the obtained final price for hotel room vouchers. By drawing on these results and through an example of the Austrian eBay platform, selling strategies for successfully listing accommodation packages at online auctions are proposed.     

Entwickeln sich wirtschaftswissenschaftliche Forschung und Politikberatung auseinander?

Most German economists show strong patterns of professional specialisation. In their work, they either focus on basic research or on policy consultancy. The evidence provided by Haucap und Mödl has been used to question work incentives in academia. The suggestion to change work incentives, however, is not supported by Richter, who rather calls into question the German tradition of research funding. He argues that Germany should devote more competitive funding to research projects and less to institutions. Schmidt et al. explore the question the other way around: do policy consultants publish in top journals? They conclude that they do. Güth/Kliemt show how precarious and limited our (technologically useful) knowledge is. The discussion of alternative policies among economic experts should be used to tease out the controversial arguments to allow for better informed political judgements. Wagner/Fratzscher take a historical view, showing that when modern economic research (and economic research institutes) apply a more pluralistic paradigm than that which prevailed in Germany for a long period after the Second World War, economic research will automatically have a more significant impact on politics, since policy advisors will produce more varied advice with the potential for realisation. Koll also claims that policy advice must not be based on a single supply-side oriented mainstream point of view. By drawing lessons from the crisis, economics must identify a new mainstream providing reliable guidance and policy advice.     

Coordinating on lower prices: pharmaceutical pricing under political pressure

We investigate the effects of political activity on pharmaceutical prices, focusing on the health care reform period in the early 1990s.We characterize firms based on their vulnerability to future price regulation and find that the more vulnerable firms were more likely to take various actions to forestall regulation, most notably coordinating on a specific percentage price increase during 1993. Since moderating price increases could have averted regulation, the coordination appears to be the industry's response to a collective action problem.     

Environmental policy incentives to adopt advanced abatement technology:: Will the true ranking please stand up?

We investigate incentives through environmental policy instruments to adopt advanced abatement technology. First, we study the case where the regulator makes long-term commitments to policy levels and does not anticipate arrival of new technology. We show that taxes provide stronger incentives than permits, auctioned and free permits offer identical incentives, and standards may give stronger incentives than permits. Second, we investigate scenarios where the regulator anticipates new technologies. We show that with taxes and permits the regulator can induce first-best outcomes if he moves after firms have invested, whereas this does not always hold if he moves first.     

Efficiency effects of tax deductions for work-related expenses

This paper studies the efficiency effects of granting deductions for work-related expenses. It is shown that much depends on whether the expenses are required for increasing taxable income and on whether the expenses are social costs. Among the noteworthy results are the following. Expenses for commuting should be taxed rather than granted deduction, as the increasing effect of commuting on taxable income is doubtful. Deductions for private costs such as expenses for housework and child care may turn out to be allocationally neutral. If they are not neutral, however, the efficient degree of deduction depends on relative labor supply elasticities. JEL Classification H21 · H24