Non-computability of competitive equilibrium

Summary. We provide a “computable counterexample” to the Arrow-Debreu competitive equilibrium existence theorem [2]. In particular, we find an exchange economy in which all components are (Turing) computable, but in which no competitive equilibrium is computable. This result can be interpreted as an impossibility result in both computability-bounded rationality (cf. Binmore [5], Richter and Wong [35]) and computational economics (cf. Scarf [39]). To prove the theorem, we establish a “computable counterexample” to Brouwer's Fixed Point Theorem (similar to Orevkov [32]) and a computable analogue of a characterization of excess demand functions (cf. Mas-Colell [26], Geanakoplos [16], Wong [50]). Received: September 9, 1997; revised version: December 17, 1997     

Voluntary disclosure of intellectual capital items in?roadshows and investor conferences: an empirical analysis of DAX30-companies

We analyze firms’ voluntary disclosure of intellectual capital in a setting of presentations to analysts and investors. Firms use presentations to analysts and investors as an additional means of reporting. Due to lesser restrictions of this kind of reporting and also due to the private channel disclosure setting of such presentations, firms are able to highlight certain issues which they think to be important for interpretation and forecasting of firm success. In such a setting we can assess the benefit-cost relation underlying these disclosure decisions. The sample consists of German DAX30 firms, which are analyzed for the years 2001, 2003, 2005, and 2007, resulting in a total of 271 observations. We calculate quantitative and qualitative disclosure indices and also analyze whether time, industry and type of presentation influence intellectual capital disclosure. Findings show that customer capital, human capital, and process capital are reported more often than other intellectual capital categories. Industry and type of presentation are strongly related to disclosure indices. There is also a weak significant relation between time and disclosure index. Overall, firms tend to prefer qualitative voluntary disclosure of intellectual capital and only carefully disclose quantitative data. This suggests that the benefit-cost relation of quantitative reporting is negative.     

Intermediation and (Mis‐)Matching in Insurance Markets—Who Should Pay the Insurance Broker?

This article addresses the role of independent insurance intermediaries in markets where matching is important. We compare fee‐based and commission‐based compensation systems and show that they are payoff equivalent if the intermediary is completely honest. Allowing for strategic behavior, we discuss the impact of remuneration on the quality of advice. The possibility of mismatching gives the intermediary substantial market power, which will not translate into mismatching if consumers are rational. Furthermore, we offer a rationale for the use of contingent commissions and address whether or not the ban of any commission payments is an appropriate market intervention.     

Budgetpolitische Eigenverantwortung bei rückläufiger Bevölkerungsentwicklung

Demographic change is a particular challenge for fiscal federalism, because the decline of population is expected to affect the various regions within a country unequally. Population growth and shrinkage co-exist, thus requiring both upward and downward adjustments in physical and social infrastructure. A recent report by the Scientific Advisory Board to the German Federal Ministry of Finance discusses the potential implications for the governance of budget policy. The present article reviews this report, which pleads in favour of tight budget constraints and clear-cut fiscal accountability at the local level. Rules have to be enforced which ensure the timely adjustment of local public expenditures to shrinking revenues. The state and federal levels have to protect themselves against the risk of having to bail out those local jurisdictions which have missed or delayed the necessary measures against growing deficits.     

How to measure the market power of banks in the lending business accurately: a segment-based adjustment of the Lerner Index

Numerous empirical studies use the price-cost-margin-based Lerner Index (LI) to assess the general market power of banks. A common procedure within those LI applications is to approximate the market price required for the LI measurement as the ratio of a bank’s total revenues to total assets. We discuss the major flaws of this aggregated procedure and propose an adjusted (i.e. business segment-orientated) LI approach, which is then applied to assess the market power of banks in the specific lending business at the country level. Our empirical study is based on an original data set containing all interest-related categories (weighted by the respective loan as well as deposit volumes) in the countries of the European Monetary Union zone (EMU) from 2003 to 2013. Our results reveal that the country-specific market power of banks in the lending business has been substantially underestimated in previous studies based on aggregated outputs. For example, averaged across the five most important economies in the EMU, we detect a calibration factor of four. Our findings corroborate the economic notion that the interest-bearing lending business is a more locally separated, and thus profitable, segment in which competition is attenuated.     

Economics in the Backyard: How Much Convergence is there between China and her Special Regions?

This paper tests the hypothesis that the links and dependency relationships between China and her special regions have changed over the past 20 years with the industrialisation of China, and the emergence of Taiwan as a source of investment and sophisticated manufactures, and Hong Kong as financial centre and supplier of services. Has this changed the size and direction of spillovers in the region, and has it curtailed or eliminated American economic leadership? We use time‐varying spectral methods to decompose the links between six advanced Asian economies and the US. We find: (a) the links with the US have been weakening, while those within a bloc based on China have strengthened; (b) that this is not new – it has been happening since the 1980s, but has now been reversed by the surge in trade; (c) that Taiwan is more integrated with, and dependent on, the Chinese economy, while Hong Kong continues her separate development based on specialisation and comparative advantage; (d) that the links with the US are rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the China zone able to control the size of their cycles; and (e) there appears to be no real evidence that pegged exchange rates encourage convergence; in fact the reverse may be true.