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A joint initiative of Ludwig-Maximilians University’s Center for Economic Studies and the Ifo Institute for Economic Research
Bulletin
Volume 15 No. 1
January 2005
SOLVING METRICS PUZZLES
Shareholder returns should be better explained by residual income than by sheer profit. The fact
that this is not the case poses a puzzle that Tom Wansbeek is determined to solve. (page 5)
LEARNING FROM THE NEIGHBOURS
If you are going to reorganise your country along western economic lines, first look at the way
those already in the system have done it: pick up the good ideas, avoid committing the same
mistakes. That’s the philosophy behind Vladimir Gutnik’s drive to steer Russia towards a
western-European-style economy.
(page 2)
IFO NEWS
(p. 4)
CESIFO WORKING PAPERS
(p. 7)
MARKETPLACE OF IDEAS
The “Marlboro Man” is not the most successful advertisement campaign ever because it is
very informative. Why, then? Andrei Shleifer, Distinguished CES Fellow 2004, provided the
answer in his Munich Lectures.
(page 3)
FACULTY NEWS
(p. 6)
INTERNATIONAL SPRING
CONFERENCE
(p. 6)
TINBERGEN LECTURE
The list of previous names delivering this prestigious lecture reads like a who’s who of renowned
economists, with a good number of Nobel laureates thrown in. Hans-Werner Sinn was the latest
lecturer in the series.
(page 2)
HANS MÖLLER SEMINARS
(p. 6)
MUNICH SEMINARS
(p. 7)
REGULATING BOTTLENECKS
The “last mile” in network-delivered services is often a bottleneck. It drives up prices and
complicates end-user competition. Introducing better regulatory mechanisms appears highly
desirable, argues Ingo Vogelsang, a leading light in network industry research.
(page 5)
RESEARCH SEMINARS
(p. 6)
FEATURED RESEARCHERS
Aleksander Berentsen (p. 3)
Wolfgang Eggert (p. 6)
Vladimir Gutnik (p. 2)
Udo Kreickemeier (p. 8)
Trond Olsen (p. 7)
Ondrej Schneider (p. 8)
Andrei Shleifer (p. 3)
Ingo Vogelsang (p. 5)
Tom Wansbeek (p. 5)
CZECH ECONOMY
Ondrej Schneider is busily analysing fiscal policies in his home country and Europe at large
with a view to improving the Czech republic’s tax and social systems.
(page 8)
FORMAL AND INFORMAL CONTRACTING
How do you make sure that each contracting party fulfills the intent of the contracts they’ve
entered into? Finding the answer to this lies at the heart of Trond Olsen’s research. (page 5)
VIEWS ON GLOBALISATION
Why is it that the public and economists hold such differing views on the effects of globalisation? Udo Kreckemeier’s research points to a likely answer.
(page 8)
THE ROLE OF INTERMEDIARIES
Financial intermediation improves allocation, according to Aleksander Berentsen. He will
continue this line of research at CES.
(page 3)
Online version of this issue available at www.cesifo.de
Vol. 15, No. 1 • January 2005
INSTITUTIONAL REFORMS, ECONOMIC MODERNISATION AND ECONOMIC COLLABORATION
Gutnik
The economic transition in most postsocialist countries has now moved into
the final stage. While the Central and East
European nations’ fundamental decision
is firmly anchored and their integration
into the EU economic framework has
been achieved, for some countries –most
notably Russia– the question of creating
the required institutional framework and
designing the economic make-up is still
an open question, one that is riddled with
contradictions. This lends particular relevance to the analysis of the possibilities
and risks associated with economic
renewal under the conditions imposed by
globalisation and in the face of deepening, expanding European integration, as
well as of those related to reforms of the
European economic and social model.
Vladimir Gutnik is one of the leading
Russian researchers of the European and
German economy. He seeks possible
applications of the European countries’
experiences –both positive and negative–
in the design of institutions in Russia.
The aim is not to replicate existing insti-
devoted his latest publications to the particular importance of these aspects for
Russian-European collaboration.
tutions, forms and mechanisms, but to
formulate a specific economic system
that is adapted to the concrete conditions
of Russia but within the (fundamentally)
European model.
In this respect, two tasks are particularly
significant: first, the analysis of the current changes in the West European countries, especially the reforming of Germany’s social free market economy, in
order not to reproduce obsolete institutions and mechanisms. Second, to consider co-operation between Russia and the
EU not solely as an instrument to increase
trade and investment, but also as the possibility to bring about institutional
reforms in Russia efficiently. Gutnik has
During his visit at CES, Gutnik will delve
mostly into the first of the two areas mentioned above, namely the analysis of
changes in West European countries, in
particular with reform of the German economic model and of some economic institutions. His findings will be used inter
alia in advising the Russian government.
Gutnik heads the Centre for European
Research at the Russian Academy of Science’s Institute for World Economy and
International Relations. His habilitation
dealt with Germany's economic policy
and his latest major publications dealt
with the EU’s expansion and its consequences for Russia, financial policy in
Germany, and Agenda 2010.
Gutnik is also a professor at Moscow’s
State Institute for International Relations
at the Russian Federation Foreign Ministry, and professor at the International
University in Moscow.
INTERNATIONAL DISTINCTION:
TINBERGEN LECTURE
Ifo Institute President Hans-Werner Sinn
was the first German economist to give
the Tinbergen Lecture, held on October
22nd, 2004. The lecture was instituted by
the Royal Netherlands Economic Association as a memorial to Holland’s first
Nobel laureate in economics, Prof. Jan
Tinbergen. Amongst previous lecturers
were Lawrence Klein, James Tobin,
Robert Solow, Franco Modigliani,
Joseph Stiglitz, Paul Krugman, Olivier
Blanchard, James J. Heckman, Peter
Diamond and Martin Feldstein.
Keeping to the Tinbergen Lecture tradition of addressing issues in the theory of
economic policy, Sinn’s lecture delved
into the implications of the European
demographic decline for innovation,
economic growth and the pensions systems, examining the root causes for this
development.
Together with Japan, the European countries occupy the lowest rungs in the
international birth-rate statistics. Within
2
(PAYGO) pension system and the socialising of children’s contributions to pension insurance. Consequently, Sinn calls
for a stronger differentiation of the
PAYGO pensions according to the number of children, with a compensation for
the remaining portion coming from a
funded pension scheme.
50 years, the EU will have lost 20 million
people, while the USA will have gained
124 million. The Old World will lose
dynamism if the steadily deteriorating
birth rate is not checked.
The central cause, according to Sinn, is
the elimination of the investment incentive for having children, itself a result of
the introduction of the pay-as-you-go
Bulletin
Specifically, he suggests capping the
legal rent by freezing both contributions
and state subsidies, introducing a taxfinanced “child pension” towards providing pension insurance for the parents,
together with a requirement that childless people accumulate capital for their
old age.
His suggestions, he asserts, would not
only solve the acute pension crisis future
pensioners will face in about thirty
years, but would also result in a major
contribution towards stabilising the
European demographic evolution, without entailing government intervention in
family planning.
Vol. 15, No. 1 • January 2005
FINANCIAL INTERMEDIATION
ANDREI SHLEIFER’S MUNICH LECTURES:
“THE MARKETPLACE OF IDEAS”
According to the conventional view, the
economic world is a marketplace where
goods and services are traded. Faced with
complex product markets characterized
by a large variety of goods, information
tends to be
important in
influencing
consumer
choice.
Berentsen
But when conditions change, messages
must respond in kind.
One market which has seen very dramatic
changes over the last few years is the
financial market.
Expectations
were overly positive before the
stock
market
bubble burst in
2000-01
and
Which product
became
extremewins out often
ly negative afterdepends
on
wards.
The
which
prodbehaviour
of
the
uct’s message
financial
interis most persuamediaries mirsive. As Andrei
Hans-Werner Sinn, Tim Besley (Laudator) and
rors this develShleifer put it
Andrei Shleifer, Distinguished CES Fellow 2004
opment
very
in his Munich
well
with
respect
Lectures, the
to the volume and the content of their
market for goods and services is a Maradvertisement activities. Their advertising
ketplace of Ideas.
budgets reached their climax at the same
Given their complexity, it is futile for
time as the most important stock indices.
most producers to provide information
Even more interestingly, the campaigns
regarding their products in elaborate
were completely refocused after the turndetail. What economists have long
ing point. Prior to the boom, the emphasis
assumed is that consumers, having
lay in reliability, trust and caution. During
received bits and pieces of information,
the 1990s, this changed to confidence,
would fill in the gaps by assuming that no
assertiveness and bullishness. After the
information corresponded to the worstbubble burst, the old reliability, trust and
case scenario. Empirically, however, this
caution advertisements were once again
assumption appears dubious: people
unearthed. Images are carefully chosen so
colour in the holes with associations and
as to inspire positive associations.
personal experiences. In such a world,
the selling of an idea involves a delicate
So, the punch line is: persuasive messages
balance between what information to
are those which are the most successful in
provide and what information to withcreating partial images which consumers
hold. The Malboro Man isn’t the most
and voters then complete with their posisuccessful advertisement campaign in
tive experiences and associations. This is
history because it is so very informative.
something especially important to keep in
It is so successful because it elicits desirmind for all those whose task it is to comable associations —independence, freemunicate less than positive news —be it
dom, abandon.
new budget cuts or new social security or
labour market reforms.
So, how does this concept of a marketplace for ideas translate into formulating
This is only a short, incomplete introducan effective communications strategy?
tion of Andrei Shleifer’s three lectures. As
Here, Andrei Shleifer provides some conin previous years, these lectures will be
crete insights. The structure and the conpublished as a volume of the Munich Lectent of the message matter. Information
tures in Economics Series which CES
must be compatible with the existing
publishes in cooperation with MIT Press.
beliefs of the target group, and not all
In the meantime, just visit our website
ideas are equally persuasive. Those meswww.cesifo.de, where you will find a
sages that elicit positive associations can
video of the three lectures.
shape competition in significant ways.
Bulletin
What is the role of
financial intermediaries? How do they
affect the propagation
of aggregate shocks?
What is the optimal
response of central
banks to these shocks
in environments with
banks?
These are typical
questions that Aleksander Berentsen is
investigating in his current research.
They are analysed in models where
financial intermediaries take nominal
deposits and make nominal loans in
money. He and his co-authors show that
financial intermediation improves the
allocation relative to the Friedman rule
and that the gains are highest under moderate rates of inflation.
Interestingly, the welfare gains arise from
the payment of interest on deposits and
not from relaxing borrowers’ liquidity
constraints. They also show that increasing the rate of inflation is welfare improving when credit rationing occurs. With
respect to the aggregate shocks they show
that the optimal monetary policy typically
involves providing an elastic supply of
currency to smooth nominal interest rates.
One other current area of research is his
study of distributional effects of monetary policies. Berentsen is particularly
interested in how the distribution of
wealth and money holdings affects the
allocation of resources and how monetary policy affects these distributions.
One finding is that monetary policy has
strong redistributive effects and that
money is typically non-neutral (in contrast to standard representative agent
models with fully flexible prices).
Berentsen is Assistant Professor at the
Department of Economics of the University of Basel and guest professor of Monetary Economics at the University of
Zurich. He has previously held positions
at the University of Pennsylvania and the
University of Bern, where he received
his Habilitation in 2003. His past
research in monetary economics has
focused on the efficiency of monetary
exchange, on optimal monetary policies
in economies with information frictions,
and the role of the divisibility of money.
3
Vol. 15, No. 1 • January 2005
IFO NEWS
WORLD ECONOMIC CLIMATE
STABILIZES AT A FAVOURABLE LEVEL
growth in Germany lies at only 1%, an
improvement in the aggregate rate is predicted for the forecast period. Inflation
The Ifo Institute’s economic forecast for
next year, at 1.4%, will be lower than for
2005 sees the world economy booming at
this year (1.6%). The situation in the
a pace not experienced for 28 years, but
labour market will remain problematic in
without the German economy participatspite of the slight economic recovery.
ing it this upswing. There is indeed an
Although
the
number
of
employed persons
has risen since the
beginning
of
2004, the number
of employees subject to social
insurance contributions has fallen.
In 2005 the number of employed
persons
will
increase as the
economic recovery continues by
an
estimated
Still growing more slowly than the EU average
145,000 persons
on average (2004: 58,000), without taking
upturn in Germany, but it has been disapinto account the effects of the Hartz IV
pointingly weak in view of the strong ties
reforms. Not until the early summer of
between the German and the world
2005 will seasonally adjusted unemployeconomies. Germany has become uncoument begin to decline. On average for
pled from world economic activity and
2005, the number of unemployed will be
continues to lag behind the growth averaround 85,000 higher than in 2004 if the
age of the old EU countries. From 1995 to
effects resulting from Hartz-IV are not
2004 no other country in central or westtaken into account. The average unemern Europe grew at a slower pace.
ployment rate will be 10.4% for 2005
Improvement is not in sight.
(2004: 10.3%).
The latest Ifo World Economic Survey
EURO-ZONE ECONOMIC OUTLOOK:
(WES) foresees a weakening of world
A LESS SUPPORTIVE ENVIRONMENT
economic growth in 2005, although this
weakening will not yet constitute a
After a slowing in the third quarter of
downturn: the world economy will con2004, more intense than expected, GDP in
tinue to grow at a fast albeit reduced
the euro zone should grow at a rate of
speed. In this respect, the general condi0.4% (q-o-q) during the three subsequent
tions of the world economy will remain
quarters. This moderate growth pace is
relatively favourable for the German
also confirmed by more pessimistic outeconomy as well.
look by respondents in the Ifo-INSEEISAE business surveys over the past
The economic picture will only brighten
months. Industrial production is estimated
slowly in Germany. Investments will grow
to have grown by 0.4% in Q4 2004. The
but at a weaker pace compared to previous
growth rate is then likely to decline to
upturns, and private consumption will
0.3% due to weaker exports in Q1 2005,
revive somewhat. Exports will grow at
before increasing to 0.5%. With regard to
only half the 2004 pace. In 2005 real GDP
domestic demand, the growth rate of priwill increase by 1.2% or, adjusted for varivate consumption should stabilise at 0.3%
ations in the number of working days, by
per quarter until Q2 2005. Inflation
1.4%. Since the trend for economic output
4
Bulletin
should fall from 2.3% in Q4 to 1.9% in
Q2, provided that oil prices continue to
ease and that the euro/dollar exchange
rate remains close to the current level.
This outlook is jointly produced by the
German Ifo Institute, the French INSEE
institute and the Italian ISAE institute.
IFO BUSINESS CLIMATE INDEX RISES
SHARPLY IN DECEMBER
The Ifo Business Climate index in Germany rose markedly in December after
having fallen in November, reaching its
highest level in seven months. The
improvement was the result of both a
noticeably more favourable assessment
of the current situation as well as a clearly more positive appraisal of the business
expectations for the next six months.
The improvement in the business climate
was evident in all four survey sectors:
manufacturing, construction, wholesaling and retailing. In manufacturing, for
the first time in four months, the business
outlook was appraised more positively.
Export expectations were only slightly
more unfavourable than in the previous
month. Despite these positive results,
employment plans in manufacturing still
indicate no end to staff reductions.
LEARNING FROM PISA
Greater school autonomy and external
examinations have the effect of raising
the level of education quality, whereas
smaller classes and more computers have
little effect. At the same time, the equalisation of opportunities is improved by
better pre-school education and later by a
multi-part school system. These are the
findings of several Ifo Institute research
projects, which, headed by education
expert Ludger Wößmann, analysed individual student data from all countries
involved in the first PISA Test and similar international student performance
comparisons like IGLU, TIMSS and
IMSS-Repeat. The recently published
results of the second PISA Test show
Germany’s average performance falling
again below the OECD average. On top
of that, its range in performance is
among the widest world-wide.
Vol. 15, No. 1 • January 2005
SOLVING METRICS PUZZLES
REGULATION OF NETWORK INDUSTRIES
Wansbeek
Vogelsang
On theoretical
grounds, shareholder returns
should be better
explained
by
some version of
residual income
(operating profit
minus a capital
charge)
than
sheer profit. This
is, however, difficult to capture
empirically.
This prompted Tom Wansbeek to investigate the question of whether this “value
metrics puzzle” may be due to the measurement problems met when quantifying
the cost of capital. His results suggest
that these problems do indeed negatively
affect the explanatory power of a residual income number like EVA (Economic
Value Added), thus answering at least
part of the question. The evidence as to
whether the effect is such that it can
solve the value metrics puzzle entirely is
mixed. He published these findings in
his Rijksuniversiteit Groningen paper
Solving the Value Metrics Puzzle.
While visiting CES he plans to continue
his research on selectivity modelling in
the context of the method of moments
and on asymptotic properties of factor
loading estimators under rotation.
Tom Wansbeek is Professor of Statistics
and Econometrics at the Rijksuniversiteit Groningen (RUG), and currently
Dean of the Faculty of Economics. He
has an MSc in Econometrics from the
University of Amsterdam (1972) and a
PhD from the University of Leiden
(1980).
Before joining RUG in 1984 he was at
the University of Southern California
and the Netherlands Central Bureau of
Statistics.
His publication record has covered theoretical and empirical econometrics, psychometrics, economic psychology, statistics, linear algebra, marketing and
finance. He is an associate editor of the
Journal of Econometrics, and previously
of the Journal of Applied Econometrics
and Statistica Neerlandica.
for broadband telecommunications
access.
Transmission networks
“transport” electricity
from generation nodes to
consumption nodes. A
well-balanced network
enables
competition
between electricity generating companies and
helps to lower electricity
costs in consumption
centers. Efficient transmission services require
balancing of supply and
Ingo Vogelsang
The most controversial
demand at any moment
issues arising from the
in time, which can be complex if transrestructuring of such network industries
mission capacity is constrained.
as telecommunications and electricity
Thus, the interaction between utilization
has been, what parts of the industries
and expansion of transmission grids is of
shall remain regulated and what such
paramount importance. A regulatory
regulation should look like. Can future
mechanism for electricity transmission
crises be avoided and, at the same time,
has to achieve efficiencies in real-time
can efficiency be enhanced through betpricing, in short-term operations and
ter criteria for deregulation and through
maintenance and in long-term investbetter regulatory mechanisms?
ments. Vogelsang is working on pricing
This question has been at the heart of
mechanisms requiring compromises on
Ingo Vogelsang’s long-term interest in
the incentives over time.
the interaction between regulation and
Broadband telecommunications access is
competition in network industries. Most
expanding rapidly. Typically, the physirecently, he has focused on the applicacal access is provided by DSL or cable
tion of the EU’s criteria for regulation of
modem.
Since these markets are typicaldominant firms in telecommunications
ly
characterised
by monopolies or duopmarkets. The particularly delicate case
olies,
the
regulation
of existing bottlehere is the wholesale market for terminecks of dominant firms may appear to
nation of mobile calls. While end-user
be appropriate.
markets are deemed competitive, high
wholesale termination charges result in
However, such regulation may thwart
incentives for building new infrastructure
high calling charges into mobile teleto replace the bottlenecks. The tradeoff
phone networks.
here is between the incentives to innovate
Regulation of this wholesale market
and invest in new infrastructure and the
exemplifies the move from end-user
short-term gains from competition via
regulation to the regulation of bottlebottleneck regulation. This tradeoff,
neck inputs for competitors. While such
Vogelsang argues, will have to be solved
regulation should enable efficient enddifferently in different countries, based on
user competition, the bottlenecks usualtheir existing infrastructures.
ly entail long-term infrastructure investVogelsang will be as guest researcher with
ments. Thus, the interest of increased
us from March to May 2005, dividing his
competition in the short run has to be
time between CES and the Ifo Institute.
balanced against the interest in longterm investments by the bottleneck
Ingo Vogelsang is a professor of ecoowners as well as by competitors
nomics at Boston University. He
bypassing the bottlenecks.
received his Dr.rer.pol. from the University of Heidelberg and his Habilitation
This balancing act is particularly acute
from the University of Bonn.
for electricity transmission networks and
The meltdown of the
telecommunications
industry in 2000/2001
and the California electricity
fiasco
in
1999/2000, as well as the
electric blackouts in the
Summer of 2003, can all
arguably be traced to
industry restructuring.
But so can enormous
price reductions in telephony and expanded customer choice.
Bulletin
5
Vol. 15, No. 1 • January 2005
CESIFO INTERNATIONAL SPRING CONFERENCE 2005
This year, the CESifo International Spring Conference will
be held on 17-18 March, again on
the premises of the British
Embassy in Berlin.
11 January 2005
Kai Konrad (WZB & FU Berlin)
The divide-et-impera principle
Lecture sponsored by SFB-Transregio
The second day will focus on analysing
the development of selected industries in
a global context and will explore the perspectives for European companies.
18 January 2005
Hans-Werner Sinn
University of Munich (LMU)
Migration, Social Standards and
Replacement Incomes
Bernd Pfaffenbach, Undersecretary of
State at the Federal Ministry for Economics and Labour, and Horst Reichenbach,
Director General for Enterprise and
Industry at the European Commission,
will give keynote speeches on the first
and second days, respectively.
25 January 2005
Ray Riezman (University of Iowa)
Production, Trade and Exchange Rates in
Large Experimental Economies
HANS-MÖLLER SEMINARS
01 February 2005 *
Avner Shaked (Univ. Bonn)
Lecture sponsored by SFB-Transregio
* The subject for this seminar will be posted at
www.vwl.uni-muenchen.de/ls_marin/hmoeller1.html
Westermann studied Applied Economics
at the University of California, Santa
Cruz, where he obtained a PhD in
International Economics in 1998. He then
moved to Munich, where he was an
Assistant Professor at Prof. Sinn’s Chair
in Economics and Public Finance. In
2002 he was a visiting professor at
UCLA, and in 2004 he finished his postdoctoral thesis at the LMU faculty of
economics. His research interests are
International Economics, Applied
Macroeconomics, Economic Policy and
the economy of Japan.
Nomination: Marko Runkel was nominated by the appointing commission to a
junior professorship for economics, with
particular focus on finance, and will take
up the post once the corresponding legal
framework in in place.
AWARDED TO CESIFO NETWORK MEMBER
RESEARCH SEMINARS
SÜDWESTMETALL PRIZE FOR YOUNG RESEARCHERS
Winter Semester 2004-2005
Monday 3:15 p.m. CES, Schackstr. 4
CESifo Research Network
member and Ifo tax expert
Wolfgang Eggert has been
awarded the 2004 Südwestmetall Prize for Young
Researchers for his postdoctoral thesis at the University of Constance.
The prize was instituted by
the Federation of the
B a d e n - Wu e r t t e m b e r g
Metal and Electrical Industry –Südwestmetal– to honour studies that have an impact on the
world of industrial work. The award can
be given for a wide spectrum of studies.
In his work on international taxation,
Eggert provides an explanation on why
sovereign states have an interest in international tax co-ordination and do not
automatically enter into ruinous tax competition.
The central result of Eggert’s study is
that with suitable strategic incentives,
6
• Appointment: Frank Westermann,
PhD, will be the acting chair in Public
Finance, substituting for LMU rector
Bernd Huber. He replaces Ulrich Woitek,
who accepted an offer for a professorship
at the University of Zürich.
During its first day, the conference
will focus on the foreign exchange
markets and on the U.S. dollar,
whose decline negatively impacts
the competitiveness of European suppliers. Further topics of discussion will
include the effect of volatile oil prices on
the global economy, as well as the
increased interest of institutional
investors in emerging markets.
Further info at www.cesifo.de/isc.
FACULTY NEWS
taxes that trigger inefficient international tax
competition can be avoided. Thus, although countries compete to attract foreign capital by, for
instance, lowering their
tax rates on mobile capital
to the disadvantage of
other countries, they
would do it in such a way
that a harmful tit-for-tat
would be averted.
International competition can therefore
create the conditions that enable sovereign states to guarantee mutual assistance
in tax enforcement, which in turn encourages countries to support international
treaties. Examples include the EU regulation to strengthen co-operation between
member states’ tax authorities in the area
of capital earnings taxation, or the EU
Code of Conduct in Business Taxation
and the corresponding OECD initiatives.
Bulletin
17 January 2005
Sascha Becker (CESifo, LMU)
Location Choice and Employment
Decisions: A Comparison of German and
Swedish Multinationals
24 January 2005
Katharina Sailer (LMU)
Searching the eBay Marketplace
31 January 2005
Daniel Krähmer (FU Berlin, under the
auspices of SFB/TR 15 GESY)
Regret-Equilibrium
07 February 2005
Thomas Kittsteiner (Oxford University,
under the auspices of SFB/TR 15 GESY)
Efficient Partnership Dissolution and
Buy-Sell Clauses
Further info regarding these seminars:
www.vwl.uni-muenchen.de/ls_rady/seminar.html
Vol. 15, No. 1 • January 2005
FORMAL AND INFORMAL CONTRACTS
NEW CESIFO WORKING PAPER PRODUCTS
Olsen
In the past quarter,
the
following
papers have made
it to the top-ten
downloads from
our database, the
CESifo DocBase.
(NL indicates
papers featured in
the Newsletter.)
During the past twelve
months, we have been
busily introducing new
products associated
with our Working
Paper series.
In April we reinstated
the series at RePEc, a
cluster of economics
websites that ranks as
the world’s largest
repository of publications in the field.
Then, by midyear we
started to disseminate
selected papers through a Press Release
service reaching accredited journalists
throughout Europe. A flurry of newspaper articles in German and foreign publications duly ensued.
November saw the introduction of our
monthly E-mail Newsletter which, among
other items, features articles discussing
four working papers. Download options
and links are offered to other papers by
the same authors or to papers dealing with
related topics. The Newsletter reaches
over 600 international journalists, as well
as more than 4,000 high-level recipients
at universities, multilateral institutions,
businesses and government agencies.
1. Paper 1321, T.
Fuchs, L. Woessmann: Computers
and
Student
Learning (1090
downloads) NL
2. Paper 1235, T.
Fuchs, L. Woessmann:
What Accounts for International Differences in Student Performance? (385) NL
3. Paper 871, N. Berthold, R. Fehn:
Unemployment in Germany: Reasons
and Remedies (272)
4. Paper 1256, G. Tabellini: The Role of
the State in Economic Development
(196) NL
5. Paper 1162, L. Woessmann: How Equal
Are Educational Opportunities? (193) NL
6. Paper 926, R. Dornbusch, S. Fischer:
International Financial Crises (176)
We have also created a CD-ROM-based
Library of Abstracts featuring every paper
we have published in our series, complete
with a highly effective search engine and,
of course, a download option.
7. Paper 132, H-W. Sinn: Germany Faces
Tax Competition (165)
At SSRN CESifo still boasts a clear lead
among its peers: over 140,000 downloads have been logged to date.
9.Paper 1093, J. de Haan, H. Berger, D.J.
Jansen: The End of the Stability and
Growth Pact? (141)
All in all, your working papers are clocking, from all outlets, a whopping 12,000plus downloads per month.
10. Paper 1265, H-W. Sinn: Migration,
Social Standards and Replacement
Incomes (126) NL
8.Paper 195, H-W. Sinn: Pension Reform
and Demographic Crisis (152)
MUNICH SEMINARS
Deutschlands große Tageszeitung
Chaired by Hans-Werner Sinn (CESifo) and Nikolaus Piper (Süddeutsche Zeitung)
Monday, 6 p.m. ; CESifo Conference Centre, Ludwig-Erhard-Hall, Poschingerstr. 5, Munich
17 January 2005
Peter Bofinger
University of Würzburg
24 January 2005
Lans Bovenberg
Tilburg University
Eine Neue Ordnung für das internationale
Währungssystem?
Balancing work and family life:
A life-course perspective
Bulletin
For contracting
parties it is always
to some extent
uncertain whether
a legal court will
be able to enforce
the real intents of
their contract. The
strict
requirements of verifiability makes it
costly, if not impossible, for parties to
arrange their transactions and design their
contract in a way that makes it completely protected by the court.
Trond E. Olsen, from the Norwegian
School of Economics and Business Administration, will pursue his research on formal and informal contracting while at CES.
If property rights allocations do not provide the parties with proper incentives to
transact, they must rely on informal selfenforcing agreements. Through repeated
transactions they can make it costly for
each other to breach such an informal
contract, by letting breach ruin future
trade. But the self-enforcing range of
contracts is limited, so the court’s ability
to enforce formal contracts is not without
consequence for the contracting parties.
If possible, parties may thus have incentives to take costly actions that affect the
ability of the court. Both ex ante preparations in terms of detailed contracting,
and ex post revelation of information can
increase the probability of fair court
enforcement. In this project Olsen focuses on the former, assuming that parties
are able to improve the verifiability of
the contracted upon actions by careful ex
ante contract specifications. To find out
what happens to the self-enforcing contract equilibrium if a party takes actions
ex ante that affect the verifiability of
actions ex post, he analyses repeated
principal-agent games where the verifiability of the agent's actions is endogenously determined by the principal’s
investments in drafting an explicit contract pertaining to the quality of the
agent’s output.
Besides aiming for general insights, the
project will focus on the relevance and
implications of these mechanisms for
financial contracting between venture
capitalists and entrepreneurs.
7
Vol. 15, No. 1 • January 2005
ANALISING CZECH ECONOMIC POLICIES
VIEWS ON GLOBALISATION
Schneider
Kreickemeier
For better or worse, governments
remain the most important players
in most European economies, not
least in those of Central Europe,
where the government’s share of
GDP is typically just below 50%.
Ondrej Schneider focuses his research
on the role governments play through
taxing people’s incomes and spending
the money to various ends. He will be
visiting CES in May as part of our drive
to help eastward integration.
The first area of Schneider’s interest is
the pensions systems and their eventual
reforms. He has analysed the state of the
current (PAYG) pension system in the
Czech Republic and demonstrated ways
the system could be reformed while
enhancing the welfare of the population.
Also, using the generational accounting
apparatus, Schneider has estimated the
implicit debt of the system.
Schneider has been also active in
research into fiscal policy issues. First,
he developed a model for separating
cyclical and structural parts of the budget deficit. More recently, his attention
has turned to the role of fiscal policy
rules, both in the national and European
context. In a series of papers he
and his colleagues have studied
different institutional frameworks
and analysed their (un)successful
application. The main argument
they have brought to the discussion is the enhancement of the
financial markets’ role in assessing and
rewarding different fiscal policies.
Schneider has also published a series of
papers analysing distributional aspects
of tax and social systems. He estimated
the total tax burden distribution in the
Czech Republic and also the effects of
the social system, including the factors
that keep unemployment unnecessarily
high in the Czech Republic.
Ondrej Schneider is an associate professor and head of the department of European Economic Integration at the
Charles University in Prague, and vicechairman of the Institute for Social and
Economic Analyses in Prague. His
research focuses on public finance,
European integration and fiscal policy
issues. He got his MS in economics at
Cambridge University and his Ph.D. at
CERGE (Centre for Economic Research
and Graduate Education) at the Charles
University, Prague.
CHANGES AT CES AND CESIFO
The new year started
with changes at the
top both at CES and
CESifo.
Ulrich
Hange left to seek
new horizons in
Berlin. He will be
succeeded as CESifo
Managing Director
by Silke Uebelmesser (left), an experienced hand at CESifo, where she was a
deputy director.
Silke, who who holds a doctorate from
the University of Munich (LMU) and is a
Bulletin
lecturer there, had hitherto held the post of
Academic Co-ordinator
at the Center for Economic Studies (CES).
She will be succeded
there by Rajshri (Raji)
Jayaraman (right),
who holds a PhD in
Economics from Cornell University and
is an assistant professor at LMU.
These changes will be reflected in our
Bulletin as well, where Raji will take up
the Chief Editorship from Silke.
There is a sizable gap
between the way economists view the effects of
real globalisation (i.e.
trade, direct investment,
immigration) on labour
markets and the way the
public does. Most economists seem to
believe that labour market effects of globalisation are rather small. Citizens, in contrast, appear to be quite concerned about
the negative effects of globalisation.
Among the many possible reasons for this
gap is that economists and citizens are
looking at different things. Specifically,
economists have invested most of their
effort in analysing the effect of trade (and
other forms of globalisation) on wages.
Public opinion data suggest that most citizens are far more concerned with
employment and unemployment levels
than with wages.
In his current research, Udo Kreickemeier looks at the labor market effects of
globalisation using a theoretical framework that takes the existence of involuntary unemployment explicitly into
account. In particular, he focuses on a
source of unemployment for which there
is considerable microeconomic and
experimental evidence across virtually all
sectors: the fair wage model.
In a couple of papers, one of which was
co-authored with Douglas Nelson, Kreickemeier uses this framework to analyze
the trade integration between developing
and developed countries. One specific
focus of these papers is the extent to
which differing labor market institutions
in the US and Europe result in systematically different outcomes as a result of
globalisation. During his stay at CES,
Kreickemeier is continuing this strand of
research by working on a paper that looks
at international outsourcing in the presence of fair wage unemployment.
Kreickemeier is a Lecturer at the University of Nottingham’s School of Economics. He holds a doctoral degree in Economics from the University of Mainz.
Munich Society for the Promotion of Economic Research (Münchener Gesellschaft zur Förderung der
Wirtschaftswissenschaft, CESifo GmbH) is the international platform of Ludwig-Maximilians University and the Ifo
Institute for Economic Research.
President and CEO: Hans-Werner Sinn
Address: CESifo, Poschingerstr. 5, 81679 Munich (Germany)
Telephone +49 (89) 9224-1410, Fax: +49 (89) 9224-1409
Chief Editor: Raji Jayaraman (RJ), CESifo Editor: Julio C. Saavedra (JS). Ifo News provided by Annette Marquardt (AM).
Contributor: Silke Uebelmesser (SÜ).