Do the COVID-19 Crisis,Ageing and Climate Change Put Swiss Fiscal Sustainability at Risk?

The ongoing coronavirus pandemic crisis as well as demographic and climate change pose major challenges for public finances. This article deals with the implications of demographic trends in Switzerland, i.e. the progressive ageing of the population and its impact on the country’s public finances in the long run. As the analysis shows, the brunt of the demographic burden is borne by the old-age pension scheme, health and long-term care. This article also addresses the financial ramifications of the COVID-19 crisis and shows the need for economic policy action over the longer term to ensure the sustainability of public finances in Switzerland. Furthermore, a qualitative assessment of climate change is included, as it constitutes an additional major long-term challenge for public finances.

     

Does data matter? Statewide longitudinal data systems and student performance in the U.S.

Although many industries have benefited from advances in data-driven technology, education is making small steps in capitalizing on the huge potential of data systems. Since 2005, the U.S. Federal Government has been making large grants to help states build statewide longitudinal data systems (SLDS) with the goal of improving programme and teacher evaluation and engage in data-driven decision-making. We analyse whether the introduction of SLDSs improved student performance, measured using test scores for math and reading tests for 4th and 8th graders, as well as high school graduation rates. We find no effects of SLDSs on student performance up to 10 years from implementation. However, we find suggestive evidence that these systems may have long-run effects, emphasizing the long-run nature of educational data collection and policy analysis.     

Platform Competition With Cash-Back Rebates Under No Surcharge Rules

We analyze competing strategic platforms setting fees to a local monopolist merchant and cash-back rebates to end users, when the merchant may not surcharge platforms’ customers, a rule imposed by some credit card networks. Each platform has an incentive to gain transactions by increasing the spread between its merchant fee and user rebate above its rival's spread. This incentive yields non-existence of a pure strategy equilibrium in many natural environments. In some circumstances, a mixed strategy equilibrium exists where platforms choose fee structures that induce merchants to accept only one platform with equal probability, a form of monopolistic market allocation.     

Adam Smith on lotteries: an interpretation and formal restatement

The paper concerns a neglected aspect of the Wealth of Nations (with the notable exception of D. Levy 1999 Levy, D. M. 1999. “Adam Smith’s Katallactic Model of Gambling: Approbation from the Spectator.” Journal of the History of Economic Thought 21 (1): 81–91. doi:10.1017/S1053837200002868.[Crossref] , [Google Scholar]), dealing directly with decision under risk. In a few pages from book I, chapter 10, Adam Smith explicitly named “lotteries” various objects of choice (possible occupations, or investment opportunities, for instance) and provided an analysis which standard expected utility glasses would hardly fit. Taking this into account allows a better understanding of the part played by typical characters like the “projector” or the “sober man”, in such matters as Smith’s conception of entrepreneurship or of the credit market. The use of some modern concepts in decision analysis (inverse stochastic dominance, rank dependent utility, prudence toward risk), is a means to show the existence, in Smith’s work, of an original theory from decision under risk, where his analysis of lotteries in the Wealth of Nations is consistent with statements from his moral philosophy on asymmetric sensitivity to gains and losses and to the regulating part played by the impartial spectator.     

National information and euro area monetary policy: a generalized ordered choice approach

We empirically analyze the influence of inflationary pressure originating from persistent national misalignments on the ECB’s interest rate decisions between 2000 and mid-2010. To do so, we introduce an indicator that summarizes the threat to euro area price stability originating from self-reinforcing expected inflation differentials. The indicator is computed based on persistent deviations of national expected inflation and GDP growth rates from the corresponding euro area aggregate. It thereby captures area-wide excess demand pressure on the euro area inflation rate. In order to determine the information content of this indicator, we add it to an empirical monetary policy reaction function. We then analyze this reaction function in the framework of a generalized ordered choice model that fits the data a lot better than its commonly used, more restricted counterpart. Within this empirical framework, we find that after controlling for several area-wide aggregates, national information does not provide additional information that is indicative of the ECB’s policy rate decision.     

Green Finance in Europe — Strategy,Regulation and Instruments

A green transformation of nearly all parts of our economy is necessary, including but not limited to energy production and consumption, mobility, manufacturing and agriculture.

     

Who is who

Praxis / MagazinNews

Who is who     

Flexible collective bargaining agreements: Still a moderating effect on works council behaviour?

We analyse the interaction between different labour market institutions in Germany, namely, industry‐level bargaining and firm‐level codetermination by works councils. In particular, we are interested in the moderating effect of flexibility measures on the link between the existence works councils and collective agreements on wages and productivity. In presence of institutional changes, the question is whether works councils in covered plants still generate rather than redistribute rents, given recent decentralisation processes in the German system of industrial relations. We augment a theoretical model to provide hypotheses, which are then tested using empirical analysis of representative German plant level data. We find that the existence of flexibility provisions in collective bargaining agreements does not alter the effect of works council on firms' wages. We find, however, that with flexibility provisions works council presence is associated with higher productivity levels than without such provisions. These findings, however, depend on the level of collective bargaining: they can only be observed in plants covered by industry‐level contracts, but do not hold in plants covered by firm‐level contracts.     

Decline of Controlled Foreign Company Rules and Rise of Intellectual Property Boxes: How the European Court of Justice Affects Tax Competition and Economic Distortions in Europe

The European Court of Justice (ECJ) has become an influential player in the field of direct taxation in the European Union (EU) in the past 20 years. However, it is unclear whether or not the ECJ's decisions and the corresponding reactions by the member states actually contribute to tax neutrality in economic terms and, therefore, to the achievement of the internal market. In 2006, the ECJ limited the applicability of specific tax rules in the EU that are intended to prohibit the excessive use of low‐tax countries by multinationals. Our counterfactual analysis shows that the court's restriction of so‐called controlled foreign company rules and the related second‐round reactions by some member states – i.e. the introduction of low‐tax regimes for income from acquired intellectual properties (IP boxes for acquired IP) – cast doubt on the seemingly positive effects the ECJ has on reducing tax distortions. In addition, we demonstrate that the restricted applicability of IP boxes as endorsed by the OECD and the European Commission would strengthen tax neutrality in Europe.