Merchanting and Current Account Balances

Merchanting is goods trade that does not cross the border of the firm's country of residence. Merchanting grew strongly in the last decade in several European economies and has become an important determinant of these countries’ current account. Because merchanting firms reinvest their earnings abroad to expand their international activities, this practice raises national savings in the home country without increasing domestic investment. This paper examines the empirical linkages between merchanting and the current account balance. Using a sample of 53 countries during 1980–2011, it shows that merchanting activity is a determinant of the medium‐term current account balance.     

Beware of Financial Repression: Lessons from History

Intereconomics - As austerity policies are unpopular with voters and high debt levels are a drag on growth, several economists, most famously Carmen Reinhart and Kenneth Rogoff, have suggested that...     

The Gender Pay Gap in EU Countries — New Evidence Based on EU-SES 2014 Data

Intereconomics - Gender differences in wages are a persistent pattern in most European countries. This study analyses the earnings divide between men and women and the driving forces behind it in...     

Hook vs. hope: How to enhance customer engagement through gamification

Many digital service providers have adopted gamification to promote customer engagement. Critical questions, however, remain about the most effective way to enhance customer engagement and increase sales by applying gamification. With a research design that combines qualitative and quantitative methods, including the use of objective sales data from a large field study and replication of the findings across different contexts, this study explores how gamification fosters customer engagement. Both field study results and a simulation study reveal gamification principles (i.e., social interaction, sense of control, goals, progress tracking, rewards, and prompts) that promote hope and consequently increase customer engagement and digital sales. Furthermore, we find that hope is more strongly associated with customer engagement than the psychological condition of compulsion, which even exerts a negative impact. This research thus explores how gamification creates value for customers and provides actionable insights for managers to foster hope through gamification as opposed to get customers hooked.     

Reducing Demand for Litigation in Consumer Disputes—a Randomized Field Experiment with Social Information

It has long been argued that alternative dispute resolution is superior to traditional court litigation. The paper reviews traditional and behavioural arguments and findings for why litigation rates remain high. The paper then reports on a natural field experiment designed to test how to improve disputes between consumers and businesses in Denmark resolution by including social information into the dispute process. The experiment demonstrates that social information significantly affects litigants’ need for litigation, but that the effect on settlement rates is non-significant. The results are discussed along with suggestions for possible future research into improving the willingness to cooperate in consumer disputes.     

Exporting and labour demand: Micro‐level evidence from Germany

It is widely believed that globalization increases the extent of employment and wage responses to economic shocks. In this paper, we investigate the effect of firms’ exporting activities on the wage elasticity of labour demand. Using rich, administrative linked employer–employee panel data from Germany and destination‐specific industry‐level information on trade flows, we explicitly control for self‐selection into exporting and endogeneity concerns. Overall, we find that exporting has a significant positive effect on the (absolute value of the) unconditional wage elasticity of labour demand. In line with our hypothesis, we further show that the effect is particularly strong for those plants that export a significant share of their output to low‐ and medium‐income countries, hence face relatively more price‐elastic product demand.     

The Valuation of Structured Products: Empirical Findings for the Swiss Market

This article analyses the valuation of 192 structured products without a capital guarantee. In contrast to similar studies, this investigation takes in both the primary and the secondary market. Its central element is a comparison of the implied volatilities of the options contained in the structured products with those of comparable EUREX options. Generally speaking, the results may well come as a surprise both concerning the scale of the phenomenon detected and its significance. Taken as a whole, the results provide grounds for assuming that certain inefficiencies exist on the Swiss market for structured products and that lead managers manage to exploit their quasi-monopolistic position in a rational manner. JEL Classification G13     

Closed-form valuation of American call options on stocks paying multiple dividends

An American call option on a stock paying a single known dividend can be valued using the Roll–Geske–Whaley formula. This paper extends the Roll–Geske–Whaley model to the n dividends case by using the generalized n-fold compound option model. In this way this paper offers a closed-form solution for American options on stocks paying n known discrete dividends. Moreover, the model also offers the critical values of the early exercise boundaries at each ex-dividend date instant, making it easy to define an early exercise strategy. Numerical examples are included to illustrate this approach.     

Der deutsche Telekommunikationsmarkt im europäischen und internationalen Vergleich

According to current discussions, the German and European market for telecommunications is not as competitive as in the US or Asia. This paper shows — based on official data — that Germany has a high availability of broadband internet connections. It is not the availability but the usage that lags behind. Fixed telephone calls as well as broadband internet connections are rather cheap in Germany, but to be prepared for the digitalisation of the economy and society, more investments in infrastructure are needed. Surprisingly the US does have a higher number of network providers than Europe. What is missing in Europe is a provider that covers all countries of the European Union; current EBITDA does not show that the European market is too fragmented to make a profit.     

Terminierungsentgelte im Mobilfunkmarkt

This article analyses and compares two methods applied by national regulation authorities (NRAs) to determine mobile termination rates: “pure LRIC (long-run incremental costs)” and “LRIC+ (KeL)”. It can be shown that “pure LRIC”, favoured by the European Commission, is not coherent with standard microeconomic theory and hampers competition since “pure LRIC” does not cover all the costs borne by the mobile network operator. NRAs should apply “LRIC+” which is suited to set competition prices (since all costs are covered) and therefore guarantees the highest level of social welfare.