Dependence on imports in the energy sector

The Federal Republic of Germany had only just recovered from the shock of the oil crisis when the stoppage of US uranium deliveries came as a forceful reminder of the dependence of its energy sector upon supplies from abroad. Fears have been voiced that the nuclear power stations may one day be faced with supply difficulties.     

A note on Peters and Severinov, “Competition among sellers who offer auctions instead of prices”

We consider a market in which sellers compete for buyers by advertising reserve prices for second-price auctions. Applying the limit equilibrium concept developed in Peters and Severinov (1997) [1], we show that the competitive matching equilibrium is characterized by a reserve price of zero. This corrects a result in Peters and Severinov (1997) [1].     

Understanding West German economic growth in the 1950s

We evaluate explanations for why Germany grew so quickly in the 1950s. The recent literature has emphasized convergence, structural change and institutional shake-up while minimizing the importance of the postwar shock. We show that this shock and its consequences were more important than neoclassical convergence and structural change in explaining the rapid growth of the West German economy in the 1950s. We find little support for the hypothesis of institutional shakeup. This suggests a different interpretation of post-World War II German economic growth than features in much of the literature.

Positive public economics: reinterpreting ‘optimal’ policies

The standard positive/normative divide fails to capture the way economists use ‘optimal’ taxation models. This paper argues that the better way to understand public economics is through a three-part division between positive, normative, and instrumental models. An instrumental model is about means and ends. Once this additional dimension is acknowledged, one can see that ‘optimal’ taxation models are closely connected to what are generally seen as purely positive models. I argue that economists have been using similar standards to assess ‘optimal’ taxation models as they use to assess positive models. Recent advances in optimal taxation theory have embraced the positive aspects of models, even about social welfare functions, something that is generally classified as a normative.     

Zum fairen Wert der Aktienanlagen eines Lebensversicherungsunternehmens aus ökonomisch-statistischer Perspektive

The present contribution deals with the problem of an adequate determination of the “fair value” of the stock portfolio of a life insurance company taking an economical and statistical point of view. The starting point consists of three standard models from mathematical finance for the development of stock prices, the martingale model, the random walk model and the AR(l)-process, the latter as a basic model capturing mean reversion effects. The best (with respect to mean square error) forecast of the future value of the process given the information about its history then is a natural and model-based concept of a “fair value”. The question remaining now is which of the alternative models gives the best representation of the data. First of all it is explained, that the martingale hypothesis is valid neither from a theoretical from an empirical point of view. However, only in the case of a martingale the market value is the best forecast, i.e. only in this case the market value would correspond with the fair value in an economical-statistical sense. This implies that the common understanding in accounting practice that the market value is a natural candidate for the fair value is not justified in theoretical terms. With respect to the question “random walk or mean reversion?” we perform a statistical-econometrical analysis of a thirty year time series of the monthly price earnings ratios (PER) of the German stock index DAX. As a result, the AR(l)-process reveals to be a better statistical representative of the time series as the random walk. This implies, that the long term equilibrium value of the AR(l)-process is the best forecast of the fair value of the DAX-PER. Given that DAX-PER then — based on different assumptions about the earnings growth rate and the time horizon — corresponding forecasts are calculated for the DAX itself. Finally it is explained that because of the pronounced long term character of life insurance business this model based conception of a long-term fair value is ideally suited for an application to life insurance companies.     

On the properties of a multiple sequential test

We consider a multiple testing problem based on an i.i.d. sample of K-dimensional observations. We want to test whether at least one of the unknown means is positive. We propose a sequential test which is of the nature of a multiple truncated sequential probability ratio test. We asymptotically analyse the expected sample size and compare it to the sample sizes which arise when one looks at effects separately.     

Efficiency in a search and matching model with endogenous participation

We show that in a search/matching model with endogenous participation in which workers are heterogeneous with respect to market productivity, satisfying the Hosios rule leads to excessive vacancy creation.