Long‐period Positions in Multi‐sectoral Cobb–Douglas Economies

The present paper considers a constant returns to scale non‐joint production economy with one primary factor (labour). It follows from the non‐substitution theorem that macroeconomic variables are completely determined by the wage–profit distribution in a long‐period position. We investigate the special case in which production in each sector as well as consumption are characterized by means of Cobb–Douglas functions. Despite the non‐linearity, this parametrization allows us to compute sectoral and macroeconomic variables in simple and intuitive equations. As noted in earlier literature, many variables behave differently than would be expected on basis of a one‐sectoral Solow growth model.     

IMF surveillance as a signal to attract foreign investment

Poor governance and endemic corruption hamper the efforts of some developing countries to attract foreign investment. Incentive schemes based on verifiable signals of varying costs and quality can be helpful in encouraging their governments to intensify corruption-control efforts. This paper ranks alternative signals, including surveillance by the IMF and other IFIs (International Financial Institutions), as catalysts for private foreign investments. We demonstrate that the ranking crucially depends on the bargaining strength of governments relative to foreign investors. If foreign lenders control the bargain, IFI signals are the first choice. If governments are in control, IFI signals become the choice of last resort.     

Strategy Development: Conceptual Framework on Corporate Social Responsibility

Corporate social responsibility (CSR) and its action-oriented offspring Corporate Citizenship (CC) currently trigger an intensifying debate on ethics, role and behavior of companies within civil society. For companies, CSR raises the question of what may be the “good reason(s)” for acting responsible towards its members, customers or society. In order to answer this question, we face the debate on CSR and its strategic engagement drivers on the levels of corporate culture, social innovation, and civil society. In this article, we provide a conceptual framework based on the analytic distinction of legitimation and sensemaking. The conceptual framework developed in this article can serve as a basis to develop a company’s CSR strategy. It provides measures and instruments to make complex CSR processes more visible and manageable.     

International Environmental Agreements,Fiscal Federalism,and Constitutional Design

In this paper, we analyze how the prospect of international negotiations over trans‐boundary pollution shapes intracountry transfer schemes when the governments of the countries' polluting regions are in charge of environmental policy and negotiations. Federal governments can implement compensation payments between domestic regions and matching grants prior to the international negotiations between the polluting regions. The subgame‐perfect transfer schemes fail to fully internalize the environmental externality, leading to an inefficient international environmental agreement. As the international spillover increases, the intracountry compensation rates increase while the matching rates decline, distorting the incentives for the regional governments in opposing directions. We also show that decentralization of environmental decision making arises endogenously.     

Conditional performance evaluation for German equity mutual funds

We investigate the conditional performance of a sample of German equity mutual funds over the period from 1994 to 2003 using both the beta-pricing approach and the stochastic discount factor (SDF) framework. On average, mutual funds cannot generate excess returns relative to their benchmark that are large enough to cover their total expenses. Compared to unconditional alphas, fund performance sharply deteriorates when we measure conditional alphas. Given that stock returns are to some extent predictable based on publicly available information, conditional performance evaluation raises the benchmark for active fund managers because it gives them no credit for exploiting readily available information. Underperformance is more pronounced in the SDF framework than in beta-pricing models. The fund performance measures derived from alternative model specifications differ depending on the number of primitive assets taken to calibrate the SDF as well as the number of instrument variables used to scale assets and/or factors.     

TRADE INTEGRATION,OUTSOURCING AND EMPLOYMENT IN AUSTRIA: A DECOMPOSITION APPROACH

Outsourcing and trade integration of advanced countries is debated with respect to employment effects, in particular for low educated workers – at least in relative terms. We study the employment effects – differentiated by educational attainment levels – of changes in the patterns of trade integration and outsourcing in the Austrian economy over the periods 1995–2000 and 2000–2005 using hierarchical decomposition analysis based on deflated input–output tables. Outsourcing is modeled as changes in the shares of domestically produced intermediates in total intermediates. A similar decomposition of the final demand vector allows us to draw conclusions on the overall employment effects of trade integration. The results suggest that the expected negative employment effects of outsourcing and rising import penetration have been overcompensated by increasing exports. Thus, the overall employment effects of Austrian trade integration have been positive for all educational attainment groups. However, whereas the total effects have been strongest for medium and high educated workers over the period 1995–2000, employment of low educated workers have been strongest and positively affected over the period 2000–2005. This pattern can be explained by a more sluggish export performance together with stronger negative effects of outsourcing and import penetration in medium and high-skill intensive products.     

Advancing into the 21st Century: Visions and Challenges Facing the Downunder Economy

Long-term visions serve to focus on essentials for sustained economic and social welfare. We now have to face up to the challenge of globalisation (growing international capital mobility), at a time when we are undoing our historic, self-imposed protectionism. This also creates new opportunities, in particular in the dynamic Asia-Pacific economies.
There still is a 'window of opportunity' before an aging population will become a dominant problem. In the next 25 years, business will have to cope with high real interest rates and major uncertainties that now surround environmental policies.
If we are to take on these challenges in constructive and beneficial ways, we have to develop an institutional order that enables the utilisation of knowledge by enterprising people. This requires a simple, transparent and reliable legal and regulatory framework, which supports competitive market processes, and the defence of openness to international trade and capital flows against particular interest groups.
It seems plausible that the Downunder economy can grow over the next 25 years at about 3.5 per cent per capita if the right institutional conditions are created. If we fail to do so, a growing share of the capital, the skills and the enterprise made Down-under will move to offshore locations which encourage a better use of knowledge and capital by enterprising people. This would deprive many of economic opportunity. The central challenge therefore is to develop a system of government and labour relations which makes the Downunder economy internationally attractive.