Spatial Competition with an Outside Good and Distributed Reservation Prices

In this paper, we analyze spatial competition within the framework of a Hotelling model with quadratic transportation costs and an outside option. The new feature of our approach is that consumers are uniformly distributed not only along the Hotelling line but also with regard to reservation prices. It turns out that in this particular model, duopolists always locate their shops exactly at the first and third quartile of the consumer distribution – i.e., at the socially optimal locations. Moreover, with uniformly distributed reservation prices, less than seventy percent of the consumers buy the good, and profits are less than fifteen percent of those in the standard model without an outside option. Received February 7, 2001; revised version received March 27, 2002 Published online: November 11, 2002     

News and correlations of CEEC-3 financial markets

We employ DCC-MGARCH models to investigate conditional correlations between six CEEC-3 financial markets. In general, the highest correlations exist between Hungary and Poland in foreign exchange and stock markets. Short-term money markets are somewhat isolated from each other. We find that the associations of CEEC-3 exchange rates versus euro are weaker than those versus the US dollar. The persistence of the effect of shocks on the time-varying correlations is strongest for foreign exchange and stock markets, indicating a tendency toward contagion. In searching for the origins of financial market volatility in the CEEC-3, we uncover some evidence of Granger-causality on the foreign exchange markets. Finally, using a pool model, we investigate the impact of euro area, US, and CEEC-3 news on the correlations. Apart from ECB monetary policy news, we observe no broad effects of international news on correlations; instead, local news exerts an influence, which suggests a dominance of country- or market-specific circumstances.     

Estimation of treatment effects: recent developments and applications

The literature on the estimation of treatment effects has matured in economics. The potential outcomes framework guides the estimation of the causal effect of economic choices or policy interventions. The application of methods from the treatment effects literature has spread from the analysis of the effects of labor market programs and the wage return to education to other areas in economics. This special issue involves methodological developments and state-of-the art applications of methods to estimate treatment effects in various areas of economics. The contributions illustrate the emphasis within the treatment effects literature on the separate but related issues of heterogeneous treatment effects and identification. The careful, high-quality substantive applications collected here show just how much applied work on policy-relevant topics has benefitted from the methodological developments in the treatment effects literature. At the same time, many of the substantive papers make important methodological contributions as well.     

On the size of government spending multipliers in Europe

This article compares the size of government spending multipliers in Europe by applying a panel structural vector autoregression analysis on 11 eurozone and 8 non-eurozone countries using quarterly data from 1991Q1 to 2012Q4. We find that (i) spending multipliers are smaller in eurozone compared to non-eurozone countries, (ii) across the euro area the impact of government spending on GDP has been higher before than after the introduction of the euro, (iii) spending multipliers are larger in the eurozone periphery than in the core countries and (iv) since the beginning of the recent financial crisis, spending multipliers have become larger both for eurozone and for non-eurozone countries. We relate these results to an emerging theoretical literature linking the size of fiscal multipliers to the monetary policy stance. We also discuss the implications of our findings for the effectiveness of fiscal policy in Europe.     

UNEMPLOYMENT,LABOR MARKET TRANSITIONS,AND RESIDUAL WAGE DISPERSION

It is commonplace in the debate on Germany's labor market problems to argue that low wage dispersion is a major reason for the high unemployment rate. This paper analyzes the relationship between unemployment and residual wage dispersion for individuals with comparable attributes. In the conventional neoclassical point of view, wages are determined by the marginal product of the workers. Accordingly, increases in union minimum wages result in a decline of residual wage dispersion and higher unemployment. A competing view regards wage dispersion as the outcome of search frictions and the associated monopsony power of the firms. Accordingly, an increase in search frictions causes both higher unemployment and higher wage dispersion. The empirical analysis attempts to discriminate between the two hypotheses for West Germany analyzing the relationship between wage dispersion and both the level of unemployment as well as the transition rates between different labor market states. The findings are not completely consistent with either theory. However, as predicted by search theory, one robust result is that unemployment by cells is not negatively correlated with the within‐cell wage dispersion.     

Home alone and often unprepared – intercultural communication training for expatriated partners in German MNCs

This article reports the results of a study of partners who accompany the expatriated representatives of multinational corporations (MNCs) on overseas missions and identifies that they are mostly home alone and often unprepared. Following a review of the literature on issues related to expatriated partners, in particular intercultural communication training (ICT), the article presents the findings of empirical research conducted in Germany on current ICT trends for expatriated partners. The study identifies the ICT methods German MNCs use to support these partners before and during international assignments. The authors surveyed 141 German expatriated partners who went on overseas missions to 36 countries. The results of this research project indicate that traditional ICT is only provided to the minority of partners in German MNCs, follows no predictable time pattern, and is mostly perceived as rather useless by participants. Particular attention is paid, however, to the target culture in the ICT design. Non-traditional ICT methods, such as Look-&-See Trips, are rather generously taken advantage of.     

Interregional redistribution and budget institutions under asymmetric information

Empirical evidence from the U.S. and the European Union suggests that regions which contribute to interregional redistribution face weaker borrowing constraints than regions which benefit from interregional redistribution. This paper presents an argument in favor of such differentiated budget institutions. It develops a two period model of a federation consisting of two types of regions. The federal government redistributes from one type of regions (contributors) to the other type (recipients). It is shown that a fiscal constitution with lax budget rules for contributors and strict budget rules for recipients solves the self selection problem the federal government faces in the presence of asymmetric information regarding exogenous characteristics of the regions.     

Sanctions and the shadow economy: empirical evidence from Iranian provinces

Using Iranian province level data from 2001 to 2013, this study finds that the international sanctions of 2012/2013 had a significantly stronger negative impact on the growth rate of the shadow economy than they did on the official GDP growth rate. Thus, the international sanctions on Iran have damaged the informal economy even more than the formal economy.     

Public Preferences for Government Spending Priorities: Survey Evidence from Germany

Employing data from a representative survey conducted in Germany, this paper examines public preferences for the size and composition of government expenditure. We focus on public attitudes towards taxes, public debt incurrence and public spending in six different policy areas. Our findings suggest, first, that individual preferences for the use of additional tax money can be categorised as either capital‐oriented expenditure or public debt reduction. Second, we find that fiscal preferences differ along various dimensions. Specifically, personal economic well‐being, economic literacy, confidence in politicians, political ideology and time preference are significantly related to individual attitudes towards public spending, taxes and debt. The magnitude of the effects is particularly large for time preference, economic knowledge and party preference. Third, public preferences for public spending priorities are only marginally affected when considering a public budget constraint.     

Managerial Efficiency in German Top League Soccer: An Econometric Analysis of Club Performances On and Off the Pitch

Abstract. This study applies stochastic frontier analytic techniques in the estimation of sporting production functions. As ex-ante input factors, we use pre-seasonal estimates of wage bills of players and coaches that are transformed during the production process of a season into ex-post pecuniary revenues and sporting success. In the case of athletic output we find a robust pattern of technical efficiency over subsequent seasons. Estimates based on economic output, however, do not support an efficiency model. A significant inter-seasonal change in overall technical productivity rather highlights the economic instability of the German soccer industry.