PUBLIC ENTERPRISES AND LABOR MARKET PERFORMANCE*

This article shows that state control of some industries may have contributed to the increase in European unemployment from the 1970s to the early 1990s. We develop a simple two‐sector model, one privately run and one publicly run, that has risk‐averse workers directing their search into one of the sectors. Assuming that the privately run sector is less able to insure its employees against uncertainty, we show that aggregate unemployment in this economy increases in response to an increase in economic turbulence.     

CONSTRUCTION OF MULTI-REGIONAL INPUT–OUTPUT TABLES USING THE CHARM METHOD

Subnational multi-regional input–output tables (IOT) are important tools for studying interregional socio-economic and/or environmental interrelations that help to address a wide range of current societal, ecological and economic challenges. However, the lack of subnational input–output data is a major obstacle which leads to a wide use of non-survey methods. Like other non-survey methods, the cross-hauling adjusted regionalization method (CHARM) was originally developed for the construction of single-regional IOT. In this paper, we extend CHARM to the case of bi- and multi-regional IOT. We find that the original CHARM formula has two limitations that are also of great importance for the single-regional case: First, cross-hauling in interregional trade is implicitly set to zero and, second, accounting balances may be violated owing to structural differences between the regional and national economies. We present a modified formula addressing these issues and examine its performance in terms of a case study.     

Innovation and productivity in the food vs. the high-tech manufacturing sector

ABSTRACT

The food sector is considered a mature industry characterized by low research and development (R&D) intensity. Nevertheless, food companies face numerous challenges and cannot do without innovation activity if they want to keep their competitiveness. In this study, we examine the impact of innovation on labor productivity in European food companies and compare it to results for firms operating in high-tech sectors. The central motivation of our study is that the low R&D intensity observed in the food sector should be mirrored in different productivity effects of innovation when compared to the high-tech sector. We use microdata from the European Union's ‘Community Innovation Survey’ (CIS) and apply an endogeneity-robust multi-stage model that has been applied by various recent studies. Our results point out major differences between the examined subsectors. While we find strong positive effects of innovation on labor productivity for food firms, we find insignificant effects in the high-tech sector. This might suggest that the returns to innovation might be best evaluated separately by sector rather than for the manufacturing sector as a whole.     

Obfuscation and Rational Inattention*

We study the behavior of duopolistic firms that can obfuscate their prices before competing on price. Obfuscation affects the rational inattentive consumers' optimal information strategy, which determines the probabilistic demand. Our model advances related models by allowing consumers to update their unrestricted prior beliefs with an informative signal of any form. We show that the game may result in an obfuscation equilibrium with high prices or a transparency equilibrium with low prices and no obfuscation, providing an argument for market regulation. Obfuscation equilibria cease to exist for low information costs and if one firm seems a priori considerably more attractive.     

Wärmecontracting in der deutschen Wohnungswirtschaft: Instrumente für eine angemessene Regulierung

German residential leases and their associated fringe costs such as heating are subject to strict regulations. The Tenancy law regulates, for instance, which components of the total costs of heating tenants have to bear and to what degree lessors can amortise the costs for modernizing the heating system. Unfortunately these regulations provide only low incentives for modernization, so that many heating systems in operation are technically obsolescent.Contracting describes a service contract, in which a Contractor plans, builds up and also operates a new heating system. This service-form has been successfully established in many other economic sectors so far. Despite the great micro- and macroeconomic advantages that Contracting offers over self-administered modernizing, it does not yet prevail in the German housing market. Thus, deregulation seems to be indispensable in this sector. However, the analysis in this article on the basis of the New Institutional Economics shows that an unrestricted opening of the market is not reasonable. In fact a suitable level of regulation must be found. Therefore, this article identifies several effective instruments from an economic point of view.     

Local air pollution and global climate change: A combined cost-benefit analysis

This article presents the findings of a combined cost-benefit analysis of local air pollution and global climate change, two subjects that are usually studied separately. Yet these distinct environmental problems are closely related, since they are both driven by the nature of present energy production and consumption patterns. Our study demonstrates the mutual relevance of, and interaction between, policies designed to address these two environmental challenges individually. Given the many dimensions air pollution control and climate change management have in common, it is surprising that they have only little been analyzed in combination so far. We attempt to cover at least part of the existing gap in the literature by assessing how costs and benefits of technologies and strategies that jointly tackle these two environmental problems can best be balanced. By using specific technological options that cut down local air pollution, e.g. related to particulate emissions, one may concurrently reduce CO₂ emissions and thus contribute to diminishing global climate change. Inversely, some of the long-term climate change strategies simultaneously improve the quality of air in the short run. We have extended the well-established MERGE model by including emissions of particulate matter, and show that integrated environmental policies generate net global welfare benefits. We also demonstrate that the discounted benefits of local air pollution reduction significantly outweigh those of global climate change mitigation, at least by a factor of 2, but in most cases of our sensitivity analysis much more. Still, we do not argue to only restrict energy policy today to what should be our first priority, local air pollution control, and wait with the reduction of greenhouse gas emissions. Instead, we propose to design policies that simultaneously address these issues, as their combination creates an additional climate change bonus. As such, climate change mitigation proves an ancillary benefit of air pollution reduction, rather than the other way around.     

From the ERM with Love: Monetary Spillover Effects to Austria

In this article, I examine the impact of domestic and European-wide monetary factors on Austrian inflation within the context of an extended version of the traditional P*-framework over the period 1973.I–1997.IV. The estimations suggest that the relative importance of national and European monetary conditions for detecting future price trends in Austria has shifted in favour of the latter variable in the course of time. Hence, long before Austria decided to join the ERM, its rate of inflation appears to be mainly driven by monetary factors abroad. The credible hard currency concept of the Austrian monetary authorities together with the strong European orientation of Austria is presumably largely responsible for this. From Austria's point of view, the results also seem to provide preliminary support for the use of European monetary aggregates in the formulation of monetary policy in Stage Three of EMU.