Comparing inequality aversion across countries when labor supply responses differ

We analyze to which extent social inequality aversion differs across nations when controlling for actual country differences in labor supply responses. Towards this aim, we estimate labor supply elasticities at both extensive and intensive margins for 17 EU countries and the US. Using the same data, inequality aversion is measured as the degree of redistribution implicit in current tax-benefit systems, when these systems are deemed optimal. We find relatively small differences in labor supply elasticities across countries. However, this changes the cross-country ranking in inequality aversion compared to scenarios following the standard approach of using uniform elasticities. Differences in redistributive views are significant between three groups of nations. Labor supply responses are systematically larger at the extensive margin and often larger for the lowest earnings groups, exacerbating the implicit Rawlsian views for countries with traditional social assistance programs. Given the possibility that labor supply responsiveness was underestimated at the time these programs were implemented, we show that such wrong perceptions would lead to less pronounced and much more similar levels of inequality aversion.     

An analytical approach for systematic risk sensitivity of structured finance products

The global financial crisis has shown that many financial institutions dealing with credit derivatives were exposed to severe unexpected losses. This indicates that systematic influences are decisively underestimated particularly with regard to structured products like securitized tranches of collateralized debt obligations. Our analytical study addresses these systematic effects: We provide a simple model which allows a closed-form comparison of both bonds and tranches with respect to their systematic risk. We demonstrate that the exposure to systematic risk of tranches may be many times higher than the exposure of bonds, even if both products share the same rating grade, e.g., an ‘AAA’ rating, measured by either default probability or expected loss. Particularly in economic downturns, default rates of tranches may be multiples of those of bonds. Our results help understand high default rates of tranches during the financial crisis and show that classical ratings are insufficient metrics for measuring risks of structured products.     

Wie viel Europa braucht die Energiewende?

It is often argued that Germany’s energy transition (the so-called “Energiewende”) needs to be “Europeanized”, so as to make the transition process more efficient. In particular, the German system of feed-in tariffs for renewables is criticized for being an obstacle to efficient European energy supply. However, we point out that Germany’s approach is no outlier but rather well embedded in the European context of heterogeneous energy policies. Also, full centralization and harmonization of political decisions on the EU-level may not be desirable in many fields of energy policy beyond climate protection if the full economic costs of energy supply are taken into account. In addition, legal and politico-economic constraints need to be considered. Against this background, we identify priorities for fostering the European dimension of the Member States’ energy policies, such as the coordination of grid extensions and capacity markets.     

The competitiveness situation of the EU meat processing and beverage manufacturing sectors

The status of competitiveness for the two most important food and beverage manufacturing sectors (meat processing and beverage manufacturing) in 13 EU countries is analysed empirically, using 1995-2002 Eurostat data. After a review of earlier agribusiness competitiveness studies, an industrial competitiveness index is proposed as a composite measure for multidimensional economic performance, covering profitability, productivity and output growth. The index approach enables relative competitiveness comparisons across industries, countries and over time. The results show that during 1999-2002, as compared to 1995-1998, for both sectors overall competitiveness in real terms slightly increased. At the same time, overall competitiveness also seems to have converged slightly across countries, implying that sector performance has become more similar. However, the two country rankings differ considerably, as do the change patterns during the analysed period.     

Ist die Kritik an internationalen Standortrankings berechtigt?

Internationale Standortrankings sind in jüngerer Zeit zunehmend in die wissenschaftliche Kritik geraten. Sebastian Gundel und Ulrich van Suntum analysieren im Folgenden, inwieweit eine kritische Studie zum L?nderranking von Ullrich Heilemann, Harald Lehmann und Joachim Ragnitz¹ ihrem wissenschaftlichen Anspruch selbst gerecht wird. Daran anschlie?end eine Erwiderung von Ullrich Heilemann, Harald Lehmann und Joachim Ragnitz.     

ON THE TAXATION OF DURABLE GOODS

This article proposes a dynamic Mirrleesian theory of commodity taxation in the presence of durable goods. A uniform taxation across all goods is suboptimal even when the consumption preferences are separable from labor. If the consumption utility function is strictly concave and durable stocks are adjustable without friction, durable investment should be taxed at a higher rate than the purchase of nondurable goods. With adjustment frictions, the wedge on durable investment depends on substitution effects between durable and nondurable consumption and can be positive or negative. An application suggests that housing investment should face higher tax rates than regular consumption.     

Health insurance subsidies and the expansion of an implicit marriage penalty: a regional comparison of various means-tested programmes

Any subsidy provision for healthcare premiums, including those embedded in Affordable Care Act (ACA), has the potential to result in some couples facing an implicit penalty when married relative to unmarried. To illustrate such consequences of means-tested subsidies of health insurance premiums, we construct hypothetical households earning different levels of income who are eligible for current subsidies in the USA. and compare the estimated implicit marriage penalty faced by these households to the one faced by low-income households who are eligible for various means-tested programmes (e.g. TANF, WIC, SNAP) for each of the 48 contiguous states. We find that, like very low-income households, marriage can potentially penalize couples who receive health insurance premium subsidies by decreasing their overall disposable income by as much as 14%. We find that the ACA increases the number of households subject to marriage penalties embedded in means-tested programmes for low-income couples. This distortion will exist for any future health insurance premium subsidies that are means tested at the household income level.     

Financial cycles and fiscal multipliers

We show that fiscal multiplier estimations may be biased by movements in asset and credit markets, as they facilitate spurious correlations of changes in cyclically adjusted revenues and spending with output growth via an identification bias and an omitted variable bias, thus overstating episodes of expansionary consolidations and downplaying contractionary consolidations. When controlling for asset and credit market movements in otherwise standard approaches to identification, we find multipliers to increase on average by 0.3–1 units. Fiscal consolidations are thus more likely to be contractionary and more harmful to growth than expected by some strands of the existing literature.