Convergence in West German Regional Unemployment Rates

Abstract. Differences in regional unemployment rates are often used to describe regional economic inequality. This paper asks whether changes in regional unemployment differences in West Germany are persistent over time. Understanding the persistency of regional unemployment differences helps us to assess how effective regional policy can be. While univariate tests suggest that changes in regional unemployment differences are persistent in West Germany, more powerful panel tests lend some support to the hypothesis that regional unemployment rates converge. However, these tests reveal a moderate speed of convergence at best. Because there is a structural break following the second oil crisis, we also use tests that allow for such a break. This provides evidence for both convergence and quick adjustment to an equilibrium distribution of regional unemployment rates that is, however, subject to a structural break.     

Buyer power and supplier incentives

This paper analyzes the origins and welfare consequences of buyer power. We show that if suppliers are capacity constrained or have strictly convex costs, there are two different channels through which large buyers can obtain more favorable terms from their suppliers. In particular, we show how the presence of large buyers can then erode the value of suppliers’ outside option. Somewhat surprisingly, we show how this can induce suppliers to undertake strategies that lead to higher output and potentially higher welfare.     

Return migration, wage differentials, and the optimal migration duration

In simple static models, migration increases with the wage differential between host- and home-country. In a dynamic framework, and if migrations are temporary, the size of the migrant population in the host country depends also on the migration duration. This paper analyses optimal migration durations in a model which rationalises the decision of the migrant to return to his home country, despite persistently higher wages in the host country. The analysis shows that, if migrations are temporary, the optimal migration duration may decrease if the wage differential grows larger. Using micro data for Germany, the second part of the paper provides empirical evidence which is compatible with this hypothesis.     

Potron and the Perron–Frobenius Theorem

Maurice Potron is an important precursor of the study of linear models of production and, in particular, of input–output analysis. We show that, contrary to Abraham-Frois and Lendjel's interpretation which we consider as unfaithful to Potron's model, there is a clear connection between his theory and the Perron-Frobenius theorem.     

Transparency on the consumer side and tacit collusion

This paper investigates the effects on tacit collusion of increased market transparency on the consumer side of a market in a differentiated Hotelling duopoly. Increasing market transparency increases the benefits to a firm from undercutting the collusive price. It also decreases the punishment profit. The net effect is that collusion becomes harder to sustain. In the limiting homogeneous market, the effect vanishes. Here market transparency does not affect the possibilities for tacit collusion.