Subsidiarity in the European Union

Against the backdrop of the highly controversial debate on the future competences of the different European institutions, the principle of subsidiarity, a fundamental principle of European Union law, has recently met with renewed interest. The contributions to this Forum discuss a number of pertinent issues.

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*A longer version of this article is to be found in H. Tomann (ed.): Die Rolle der europ?ischen Institutionen in der Wirtschaftspolitik, Baden-Baden 2006, Nomos, pp. 59-76.     

Rationalisierung und Rationierung im Gesundheitswesen aus ethischer Perspektive

Demographic ageing and technological progress leads to rising health care costs. Under the assumption that the solidarity-based financing of the German Statutory Health Insurance System will reach its limits, the authors discuss how and on which level questions about rationing should be answered. From an ethical point of view, rationing should be based on general and consistent rules at the governance level rather than on case by case decisions by healthcare providers. Moreover, transparency is inevitable to maintain the relationship of trust between physicians and patients and to improve the patient’s wellbeing.     

Towards a classification of marine wildlife crime: Marketing strategies to curtail illegal fishing,malicious acts,and waterway pollution

Much effort has been dedicated to fighting wildlife crime with modest results. This paper focuses on marine wildlife crime, which suffers from a certain level of neglect due to terrestrial bias (a predominant focus on land animals). Despite legislative and enforcement efforts, there has been little integration of marketing techniques to curtail marine wildlife crime. For these reasons, we set out to study current issues surrounding marine wildlife crime by conducting interviews with three experts in areas of marine education, research, and legislation. The interviews provide an overview of the threats to marine wildlife, aid in the development of a classification of marine wildlife crime, and provide strategies as to what marketing actions may be useful to reduce it.     

Exchange-rate adjustments in small market and centrally planned economies

In a centrally planned economy (CPE) that has eliminated detailed central planning of output and foreign trade and introduced some domestic price flexibility and organic linkages to world-market prices, the exchange rate can take on more than an accounting function. This paper contrasts the effects of exchange-rate adjustment in such a “modified” CPE (or MCPE) with those in a market economy. There are a number of reasons why MCPE authorities might eschew devaluation as a policy instrument, despite the possibility that it would be more effective in some cases in improving the trade balance than in a market economy.     

The Law of One Price—A Case Study

We use retail transaction prices for a multinational retailer to examine the extent and permanence of violations of the law of one price. For identical products, we find typical deviations of 20–50 percent, with some evidence for convergence over time. Such differences might be due to differences in local costs. If so, relative prices of similar products (round versus square mirrors) should be equal across countries. In fact, relative prices vary significantly across very similar goods within a product group. The finding suggests that differences in local distribution costs, local taxes, and probably tariffs do not explain the price pattern, leaving strategic pricing or other factors resulting in varying markups as alternative explanations.
JEL classification : F 41; L 11     

Sofa: A simulation program for predicting and evaluating the policy effects of grants-in-aid

This paper motivates and describes a computer simulation program to predict the general equilibrium effects of grants-in-aid to local governments on the tax and spending decisions of these governments. The SOFA (Simulation of Fiscal Assistance) program explicitly incorporates the effects of family relocation (the “Tiebout” adjustment process) and the availability of competitive private market providers (e.g. private schools, hospitals, recreation facilities) on the levels and distribution of local public services. SOFA can simulate the effects of the four main forms of grants-in-aid: (1) lump-sum transfers, (2) matching aid, (3) base equalizing aid, and (4) tax relief aid. In addition to the individual city predictions on taxes and spending SOFA provides the following summary statistics: (1) mean level of spending, (2) coefficient of variation of spending, (3) values for a utilitarian, Rawlsian, and egalitarian objective functions, (4) the central government tax rate needed to finance aid, and (5) the percent of families in the region who prefer the private provision of the “public” service. A copy of the program and a program users manual containing a detailed derivation of the model as well as user's instructions are available from the authors upon request.     

New Technologies for Customer Rating: Integration of Knowledge-Based Systems and Human Judgement

Avoiding incorrect credit decisions and minimizing the required effort are crucial factors for the economic success of a bank. A basic task of credit granting is a correct valuation of a customer's annual account. CUBUS was designed to give general valuation and a first global impression of a company quickly. It also draws the user's attention to the most critical items of the balance sheet. In addition, detailed analysis and valuations of each annual account item is provided. CUBUS goals which have been achieved include increasing decision quality, improving the know-how level of the staff, improving communication among different departments and finally defining and establishing generally accepted guidelines and norms. The system allows very flexible human-computer cooperation. It works as a competent assistant which provides the following functions: autonomous valuations, reactive assistance, active consulting, interactive problem solving, tutoring and supervising. When SBC's (Swiss Bank Corporation) general management decided that all commercial customers had to be rated, an application had to be developed to make CUBUS judgements available to all credit specialists within the existing mainframe database environment. The integration of mainframe databases and transactions, knowledge-based systems running on workstations, and the judgement of human users raised the challenging question of what general principles have to be applied when such diverse components have to be combined in the most efficient way.     

News‐Specific Price Discovery in Credit Default Swap Markets

We examine the lead and lag relation between equity and credit default swap (CDS) markets. We find that price discovery in equity markets only leads CDS markets following aggregate positive news and not so following other news. While difficult to reconcile with standard asset pricing theories, asymmetric price adjustment is common in goods markets, arising from intermediary power. We provide an explanation for this asymmetry based on dealers exploiting informational advantages vis‐à‐vis investors with hedging motives. Consistent with this explanation, we find that the patterns we document are related to firm‐level proxies for hedging demand, as well as economy‐wide measures of information asymmetries.     

The liquidity of bank assets and banking stability

This paper shows that an increased liquidity of bank assets, paradoxically, increases banking instability and the externalities associated with banking failures. This is because even though higher asset liquidity directly benefits stability by encouraging banks to reduce the risks on their balance sheets and by facilitating the liquidation of assets in a crisis, it also makes crises less costly for banks. As a result, banks have an incentive to take on an amount of new risk that more than offsets the positive direct impact on stability.