Does downward nominal wage rigidity dampen wage increases?

Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a dataset comprising more than 169 million wage changes. We find evidence of a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets.     

The new protectionism and the Third World

Although there is general agreement on the fact that the new protectionism of the industrialised countries is damaging to developing countries, the majority of the latter show hardly any interest in a return to the classical GATT system. Prof. Körner provides an explanation for this apparently paradoxical attitude on which be bases his case for a reform of the existing system of international trade.     

Pricing of payment cards, competition, and efficiency: a possible guide for SEPA

This paper analyzes equilibrium pricing of payment cards and welfare consequences of payment card competition. In particular, we model competition between debit and credit cards. The paper argues that optimal consumer and merchant fees must take safety, income uncertainty, default risk, and the merchant’s handling cost of cash into account. Market segmentation where debit and credit cards serve different merchant segments yields a preferred “payment mix”. However, when markets are segmented, payment card fees do not necessarily reach their socially efficient levels. Hence, thoughtful regulatory intervention regarding merchant fees may still be necessary to raise total surplus.     

Networks and equity market integration: European evidence

Deregulation, globalization, and technological developments have altered the business strategies of stock exchanges around the world. We investigate whether the adoption of network strategies by stock exchanges creates additional value in the provision of trading services. Using unbalanced panel data from all major European exchanges over the period 1996-2000, we examine the consequences of network cooperation on a number of stock market performance measures. We show that adopting a network strategy is associated with higher market capitalization, lower transaction costs, higher growth, and enhanced international stock market integration.     

Drei herausragende Controller mit der Ehrendoktorwürde der European Business School ausgezeichnet

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