EU agriculture: Reduced protection from exchange rate instability

In the past, the protection of agriculture in the EU from exchange rate instability was accomplished at the cost of confusing regulations, welfare losses and the discrimination of other sectors. Will the 1993 reform of the Agri-Monetary System, combined with wide 15% European Monetary System margins and the recent GATT agreement, lead to more efficiency in European agriculture?     

Was ist von der Familienpolitik der Großen Koalition zu erwarten?

A major evaluation of family policies in Germany came to the primary conclusions that family leave and early childhood education and care policies are effective. Specific German tax regulations, however, are less effective, as they decrease the incentives, especially for mothers, to return to the labour market or increase the number of hours they work. The tax regulations for couples, in particular, should be reformed, as this would offer funding possibilities for other worthwhile policies. However, it should not be forgotten that tax regulations are not just aimed at family policies. Indeed, their primary function is to reduce the burden on families and to keep them out of poverty, as demanded by the Germany Federal Constitutional Court. Given the findings of this evaluation, the new German government plans to implement policies which make sense but which do not go far enough. Public child care has been shown to increase maternal employment, household income and fertility in Germany. There are good reasons to invest further in public child care for young children; however, the focus should not only be on the quantity but also the quality of care.     

Heterogeneous firm-level responses to trade liberalization: A test using stock price reactions

This paper presents novel empirical evidence on key predictions of heterogeneous firm models by examining stock market reactions to the Canada–United States Free Trade Agreement of 1989 (CUSFTA). I derive testable predictions for a class of models based on Melitz (2003). Using the uncertainty surrounding CUSFTA's ratification, I show that the pattern of abnormal returns of Canadian manufacturing firms was strongly consistent with predictions related to export (U.S.) tariff reductions, but less so with predictions related to import (Canadian) tariff reductions. Lower Canadian tariffs did have an effect through the implied reduction in intermediate input tariffs, however.     

The case against a common fiscal boost in Europe

Policymakers in the EU member states are currently shaping rescue packages to prevent the financial crisis hitting their economies with unmitigated force. Each government is responding to the emerging problems with a country-specific set of measures. Given the global nature of the crisis, would coordinated action at the European level not be a better approach? Was the German government — much-criticised for its initial reluctance to adopt massive fiscal stimulation measures — right after all to exploit the option value of waiting in a situation of high uncertainty?     

Foreign direct investment,tax competition and social expenditure

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that redistributive social welfare state policies are valued by multinationals as, for instance, they may signal a government's commitment to social stability.     

Estimating a Dynamic Model of Household Choices in the Presence of Income Taxation

The purpose of the article is to study the incentive and distributional consequences of income taxation. The article analyzes tax changes in a dynamic setting. The framework is estimated under a set of different identifying assumptions using parametric, nonparametric, and semiparametric techniques. The empirical results focus on tax reforms in Germany in the 1980s. The article shows that these reforms did not significantly lower effective tax rates. The findings also suggest that estimated elasticities for male labor supply are small, ranging between 0.02 and 0.2.     

Can Production Subsidies Explain China's Export Performance? Evidence from Firm‐level Data*

This paper analyses the relationship between production subsidies and firms’ export performance using a very comprehensive and recent firm‐level database and controlling for the endogeneity of subsidies. It documents robust evidence that production subsidies stimulate export activity at the intensive margin, although this effect is conditional on firm characteristics. In particular, the positive relationship between subsidies and the intensive margin of exports is strongest among profit‐making firms, firms in capital‐intensive industries, and those located in non‐coastal regions. Compared to firm characteristics, the extent of heterogeneity across ownership structure (SOEs, collectives, and privately owned firms) proves to be relatively less important.     

Bankruptcy, Counterparty Risk, and Contagion

This paper provides a unifying framework for the modeling ofvarious types of credit risks such as contagion effects. Weargue that Markov chains can efficiently be used to tackle theseproblems. However, our approach is not limited to pricing problemswith contagion. On the theoretical side, we derive pricing formulasfor three building blocks that are generalizations of contingentclaims studied in Lando (1998). These claims can be thoughtof as atoms forming the basis for all credit risk payments.Furthermore, we demonstrate that, in general, all contingentclaims exposed to credit risk satisfy a system of partial differentialequations. This is the key result to calculate prices of creditrisk claims explicitly and efficiently.