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A joint initiative of Ludwig-Maximilians-Universität and the Ifo Institute for Economic Research
No. 3 • August 2001
Bulletin
Venice Summer Institute
Ifo Annual Meeting
Industrial Organisation
Münchner Seminare
Area Conferences
Report on the second
CESifo Summer
Institute in Venice
Willem Duisenberg
addresses large audience
in Munich
Christian Gollier steers
the new CESifo research
area
Lecture series finds
growing interest among
local businessmen
Network members
enjoy new conference
facilities in Munich
EXPLAINING EXCHANGE RATE
MOVEMENTS:
WHY “STORIES” PROLIFERATE
Paul De Grauwe, a leading scholar in the
field of international macroeconomics,
will visit CES in July. Since receiving
his Ph.D. from John Hopkins University,
USA, in 1973, he has visited numerous
universities and international organisations, among them. the University of
Michigan, Tilburg University, the IMF
and the Bank of Japan. He is presently a
professor at the Catholic University of
Leuven, Belgium and is a Senator in the
Belgian Parliament. In 2000 he became
the Area Co-ordinator for the
Macroeconomics and International
Finance area of the CESifo research
network.
BOOM-BUST CYCLES
Aaron
Tornell,
Professor
of
Economics at the University of California, Los Angeles, will visit CES in
September this year. Professor Tornell
received his undergraduate degree
from ITAM in Mexico, his Ph.D. from
MIT and was an assistant professor at
Harvard and Columbia University
before joining UCLA last year. He has
published in all leading general and
field journals and is Associate Editor
of the Journal of International Economics and Economics and Politics.
Aaron Tornell, CES visitor in September
Paul De Grauwe, CES visitor in September
Paul De Grauwe’s research has focused
on two areas in international macroeconomics. The first one deals with
monetary unification. He has analysed
the conditions that countries should
satisfy if they want a monetary union to
be successful. Since the start of EMU he
has switched his research interest
towards the formulation of optimal
monetary policies in Euroland when
shocks are asymmetric. The research has
led to publications in international
(continued on page 2)
His current research includes issues in
international finance, currency crises
and asset pricing. Whilst in Munich
Tornell plans to continue his research
on emerging markets, which tend to
experience more pronounced boombust cycles than developed economies.
In his research he has focused on the
distortions that underlie this greater
volatility. In his theoretical work he
develops models in which the “lending
channel” plays a key role and where
lending booms and credit crunches
occur along an equilibrium growth
path.
In his recent empirical work with
Anne Krueger he has documented a
number of stylised facts that have
characterised boom-bust episodes in
emerging markets, and has considered
in detail the Mexican experience. He
shows that prior to a crisis there is
typically a real exchange rate
appreciation and a lending boom,
during which credit grows unusually
fast. Lending during these booms is, to
(continued on page 6)
LABOUR MARKET INSTITUTIONS
AND PUBLIC REGULATION
On 26–27 October CESifo is hosting a
conference on “Labour Market Institutions and Public Regulation” in Munich.
The conference, which will be organised
together with the International Seminar
in Public Economics (ISPE), is a twostage conference with the second stage
taking place in Caddenabbia, Italy, in
May 2002. The conference focuses on
the issue of which fiscal arrangements,
labour market institutions and public
regulation best serve a modern market
economy. On the one hand, a reduction
in the amount of labour market
regulation is common policy advice, but
on the other hand these regulations may
well be beneficial in protecting workers
from excessive shocks and economic uncertainty, counteracting market failures
and serving equity objectives. The
scientific organisers of this conference
are Michael Keen, IMF, Jonas Agell,
Uppsala University and Alfons
Weichenrieder, University of Munich.
If you are interested in attending this
conference, please contact the CESifo
office at [email protected].
No. 3 • August 2001
WHY STORIES PROLIFERATE,
CONTINUED
journals, and to the textbook “The
Economics Monetary Union” published
by Oxford University Press.
Conference on The Economics of
Organisation and Corporate Governance
Structures
Call for Papers
CESifo and the German Economic Review invite submissions to its first
conference on the Economics of Organisation and Corporate Governance
Structures, to be held on 25-26 October 2002, at the CESifo conference centre
in Munich, Germany. Conference papers will be published in a special issue of
the GER. Manuscripts not accepted for the conference but otherwise promising
will be considered as regular submissions to the GER.
The following economists have agreed to serve as guest editors for this issue:
Patrick Bolton, Princeton University
Bernd Rudolph, University of Munich
Ralf Ewert, University of Frankfurt
Klaus Schmidt, University of Munich
Peter Jost, WHU, Otto-Beisheim Hochschule
Urs Schweizer, University of Bonn
Dilip Mookherjee, Boston University
The second of De Grauwe’s research
interests lies in exchange rate
economics. More specifically, he has
analysed non-linear models of exchange
rate behaviour, including chaotic
models. These models suggest that
exchange rates can be dissociated from
their underlying fundamental variables
for a relatively long time. One of the
implications of this research is that, quite
often, movements in exchange rates are
inexplicable. Market analysts fill the
knowledge gap by inventing stories. In
this way, De Grauwe explains the
proliferation of stories to justify exchange rate movements ex-post.
While at CES Paul De Grauwe will
pursue his research on the complex
nature of the exchange rate movements.
In particular, he will analyse the nonlinear relationship between exchange
rates and fundamentals using Markov
switching models. This may help economists to understand how the markets
select different “stories” about the
determinants of exchange rates.
Josef Zechner, University of Vienna
MK
Stefan Reichelstein, University of California, Berkeley
Submissions should be mailed by 28 February 2002 to the conference
organiser:
Professor Urs Schweizer (E-mail: [email protected])
Department of Economics
University of Bonn
Adenauerallee 24
53113 Bonn
Germany
DOES NEUTRAL TECHNOLOGICAL
CHANGE AFFECT UNEMPLOYMENT?
Moutos
E-mail submission of papers (in pdf format) to Urs Schweizer is welcome.
Authors of submitted papers will be notified no later than 15 May 2002 whether
their paper has been accepted for the conference.
CESifo will provide accommodation and reimburse economy travel costs for
CESifo Research Fellows with accepted papers. Other participants with
accepted papers will be informed about the reimbursement details in advance.
Non-presenting participants should provide their own funding for travel and
accommodation.
Further questions regarding the organisation and scientific content of the
conference should be addressed to the conference organiser.
For more information visit our web site: www.CESifo.de
Thomas Moutos, who will be at CES in
September, is Professor at Athens
University of Economics and Business.
After receiving his Ph.D. from
McMaster University in 1987, he taught
at the Universities of Glasgow and
Stirling before returning to Greece.
Moutos’ initial research interests
covered issues of stabilisation policy in
open economies as well as macroeconomic consequences of imperfect
competition in product and labour
markets. Some of his major findings in
these fields were included in the
monograph Human Capital, Employment and Bargaining, co-authored with
Bob Hart and published by Cambridge
University Press.
(continued on page 3)
2
Bulletin
No. 3 • August 2001
In more recent work Moutos focuses on
international trade in vertically differentiated products. An important implication of international trade in these goods
is that increase in domestic wages can
result in a decrease in the volume of a
country’s imports if the country has
comparative advantage in the production
of high-quality varieties. In joint work
with Jim Malley, this hypothesis was
found to be supported by empirical
evidence.
Thomas Moutos, CES visitor in September
Another of his ongoing research interests
concerns
the
implications
of
technological change. Moutos has
demonstrated that increases in inequality
can be the outcome not only of skillbiased but also of neutral technological
change. In work in progress done jointly
with Bill Scarth he examines the effects
of neutral technological change on
unemployment in models which
emphasise the political economy
consequences of various policy
responses. During his stay at CES
Moutos plans to work further on these
issues by examining the effects of a
policy entailing the unconditional
payment of a guaranteed annual income
to all citizens. Economists such as
Atkinson, Meade and Tobin have
advocated this policy as being one which
could redistribute income while
minimising undesirable indirect effects.
MB
HOW TO CHEAT YOUR VOTERS
Schultz
Christian Schultz, Professor of
Economics at the University of
Copenhagen, will visit CES in October.
Schultz received his Ph.D. in 1989 and
was a visiting scholar at Harvard
University and the University of
California and visiting professor at the
Copenhagen Business School. He is
editor of the Scandinavian Journal of
Economics and on the editorial board of
The Manchester School.
Schultz’ main research interests are
found in the spheres of political
economy. One major research topic has
been the effect of asymmetric information between voters and politicians in
democracies. He has also been interested
in fiscal federalism, in particular the
interplay between migration, local public
goods and local public debt. His focus
has been on the problems created by the
fact that tax-payers can evade local
public debt by migrating. He has recently
worked on the effects of public funding
of political parties, together with Ignacio
Ortuno Ortin of the University of
Alicante. In most European countries a
large fraction of the political parties’
budgets come from public funds and are
related to how well the parties fare in the
elections. This creates special incentives
and has implications for the formation of
policy.
Christian Schultz, CES visitor in October
During his stay in Munich, Schultz will
continue to pursue his line of research in
political economy. One particluar
concern will be the strategic use of
campaign spending by parties which
cater to various groups of voters by
offering them special benefits and
money. The voters in turn vote for those
parties which offer them the best. The
research is concerned with the role of
information. When voters learn about
policies through campaigns, the parties
have an incentive to inform voters
strategically. The main question he wants
to address is which groups will benefit,
and why, as a consequence of the
strategic use of campaigning. In line with
his previous research on public funding
of political parties, his research aims at
Bulletin
understanding of how parties funding
and spending affects policy in a
democracy.
CK
WHY “GLOBALISATION” MUST
NOT ALWAYS WORK: THE ROLE
OF SPILLOVERS AND FIXED COSTS
Bjorvatn
The forces of “globalisation” are often
viewed as inevitable, making the whole
world a playing field for a few major
multinational enterprises and rendering
redistributive tax policy useless. Kjetil
Bjorvatn, who will be visiting at CES in
September from the Norwegian School
of Economics and Business Administration in Bergen, takes a closer look at this
view.
Empirical evidence suggests that there
may be significant spillovers associated
with the operations of multinational
enterprises. Since multinationals are
often at the technological forefront in the
industries in which they operate, this
might influence their cross-border
investment decisions. Spillovers may
take place as a multinational affiliate
operates side by side with less advanced
host country firms. In addition, less
advanced firms may actively seek
knowledge by investing in the home
market of their more advanced
competitors. Kjetil Bjorvatn aims at
shedding light on the entry strategies of
the leading firm given that the less
advanced firm can reap the benefits of
spillovers both from the leading firm’s
affiliate and from the leading firm’s
headquarters.
Another of Bjorvatn’s projects deals with
income distribution and tax competition.
The starting point for this project is the
rather surprising empirical fact that
countries with a fairly equal distribution
of pre-tax incomes redistribute more
than countries with a less equal
distribution. There may be several
reasons behind this observation. One
possible explanation rests on the
assumption of fixed costs associated
with the mobility of capital and labour.
Given the presence of such fixed costs, a
country characterised by a fairly equal
distribution of income and wealth can
(continued on page 6)
3
No. 3 • August 2001
IFO NEWS
ACCELERATED DECLINE OF
WORLD ECONOMIC CLIMATE
According to the latest Economic Survey
International, conducted in April 2001,
the international economic climate has
continued to cool (87.7 compared to 94
index points in January 2001). This is the
fourth decline in a row; the index has lost
about one quarter of its value since
peaking in April 2000 (see Fig.1). This
time the decline of the overall indicator
was caused exclusively by more
pessimistic assessments of the current
situation, whereas the expectations for
the next six months improved slightly.
This data constellation raises hopes that
the economic slowdown will bottom out
during the second half of the year.
Although assessments of the current
situation have deteriorated further,
expectations for the next six months
have stabilised at the January level.
Experts are still optimistic for Eastern
Europe, the only region where assessments of the current situation have not
deteriorated. Expectations for the next
six months slipped drastically, however.
CONGRATULATIONS!
We congratulate Dr Werner H. Strigel on
the occasion of his 80th birthday. Those
who are familiar with the Ifo Institute
and its famous Ifo Business Climate
Index are sure to be familiar with his
name. Werner Strigel created this
indicator in 1972 from data on the
assessment of the current
business situation and
projected business developments
over
the
following six months;
qualitative data which
the Ifo Institute has
surveyed monthly since
1949. The Ifo Business
Climate Index does not
only mirror the actual
state of the economy but
is also a good predictor
of its future performance. As such, it can
affect share prices and
Results of the April ESI survey: international economic climate
exchange rates and is,
therefore, a highly sought-after piece of
In the United States, the current situation
information whose quarterly release is
has cooled markedly and is now, for the
keenly awaited. The index is regularly
first time since the recession in the early
published in the German and inter1990s, below the ‘satisfactory’ level.
national press.
Expectations, in contrast, moved back
Werner Strigel was a member of the Ifo
into positive territory. This may indicate
Institute’s staff for thirty years (from
that economic recovery is around the
1951 to 1981), serving from 1961 as
corner. The current weakness of the US
department chairman and from 1972 as a
economy is concentrated in the
member of the Executive Board. Under
investment sector: in contrast, private
his leadership, the Ifo Business Survey
consumption is holding up. In Asia, the
was developed into the important
current situation deteriorated further to
instrument it is today, and business
well below the satisfactory level. The
surveys were introduced world-wide. He
only regional exceptions are Singapore
was also instrumental in the
and China, where positive assessments
development of the Economic Survey
still prevail. In Western Europe, the
International For 20 years Werner Strigel
upswing continues to lose momentum.
was Director of CIRET, the Centre for
4
Bulletin
International Research on Economic
Tendency Surveys, and contributed to
the international discussion of research
findings based on survey data at
numerous CIRET conferences.
Werner Strigel retired from the Ifo
Institute in 1981, but for several years
continued to write about business cycles
and the role of survey-based economic
indicators. Today he watches the work of
the Institute from a distance, although
with great interest. And whenever young
Ifo staff members ask “Who is Werner
Strigel?”, the simple answer is: “The
creator of the Ifo Business Climate
Index!”.
THE 52ND ANNUAL MEETING OF
THE IFO INSTITUTE
On 26 June the Ifo Institute held its 2001
Annual Meeting. On this occasion
President Hans-Werner Sinn presented
the latest Ifo forecast for the international and the German economies.
With an impressive picture show he
highlighted the economic problems in
Hans-Werner Sinn,
President of the Ifo Institute
the United States, Japan and Europe and
shocked the audience and the many
present journalists with a pessimistic
figure of just 1.2% for German real GDP
growth in 2001.
The keynote speaker at this year’s
Annual Meeting was Willem F.
Duisenberg, Chairman of the European
Central Bank. His talk was entitled “The
European Economic and Monetary
Union: A Success Story”. After briefly
No. 3 • August 2001
CESIFO CONFERENCES SUMMER SEMESTER 2001
outlining the history of EMU,
Duisenberg focused in detail on to the
“two pillar” strategy of the ECB. In his
opinion, the growth of the broad money
stock M3 points to “generally good
prospects for the maintenance of
medium-term price stability”. An
analysis of the second pillar of ECB
strategy – real GDP growth in the
neighbourhood of potential growth –
confirms, in Duisenberg’s opinion, “that
the present level of key interest rates is
appropriate for safeguarding mediumterm price stability in the euro area”.
Duisenberg admitted that growth
prospects for 2001 and 2002 have
declined since last December. The ECB
assumes that euro-area real GDP growth
will closely correspond to potential
growth. The inflation rate may come in
somewhat higher, however, than
expected at the end of 2000. Duisenberg
emphasised that an inflation rate above
Willem Duisenberg,
Chairman of the European Central Bank
2% over a longer period of time “must
not lead to higher wage increases”. In
concluding his remarks, Duisenberg
looked at the implications of the
introduction of euro coins and paper
currency. He does not expect any
sizeable effects on M3 growth or on the
exchange rate. He warned that “price
developments in connection with the
introduction of euro coin and paper
money would have to be watched closely
in coming months by everyone;
consumers, government and not least the
ECB”.
The text of the speeches by Hans-Werner
Sinn and Willem F. Duisenberg are
available on the Ifo homepage under
www.ifo.de.
REDISTRIBUTION AND EMPLOYMENT –
NEW SOCIAL POLICIES FOR THE NEW
MILLENNIUM
On 15-16 June 2001 CESifo hosted the
second Norwegian-German Seminar on
Public Economics at the CESifo
Conference Centre in Munich. More than
25 economists discussed the possibilities
for maintaining social standards and new
approaches to social policies for the new
millennium.
In the first session Fred Schroyen (NHH)
presented his work on the effectiveness
and cost associated with different
programmes for alleviating long-term
poverty, and showed the effects of
unconditioned grants and grants
contingent on a work requirement or
private labour market earnings on longterm poverty alleviation. Bertil
Tungodden (Bergen) then tried to
integrate common interpretations of the
ethics of responsibility and the ethics of
compensation into the framework of a
first best taxation model. This
combination of economics and philosophy was discussed by Geir Asheim
(Oslo). Final speaker of the fist day was
Wolfgang Ochel (Munich) who presented a paper on the experience of
workfare programmes in the United
States, giving some insights on how
programmes such as the Earned Income
Tax Credit may help to reduce
unemployment in Germany.
The second day started with a focus on
multinational companies. Ian Wooton
(Glasgow/Bergen) showed that, due to
different types of uncertainty, countries
may attract different industries with a
given policy mix of subsidies and
protection schemes. In the next paper
Fredrik Carlsen analysed the influence of
local services and economic conditions
on migration decisions, and showed
empirically that local authorities have a
significant influence on migration and
through this an influence on the share of
young people via municipal fees and
services. Last speaker of the session was
Berthold Wigger (Mannheim), who
examined the influence of trade union
objectives on economic growth. He
argued in an overlapping generation
model that by shifting income from the
owners of capital to workers, economic
Bulletin
growth might be stimulated, if the
workers’ propensity to save exceeds
that of the capitalists.
In questioning whether the tax system in
Norway encourages too much education, Annette Alstadsæter showed that
a progressive labour income tax reduces
the total return to education, thereby
alleviating efficiency distortions in the
capital market due to capital taxation.
Laszlo Goerke (Konstanz) highlighted
the welfare effects of redundancy
payments for collective dismissal in
contrast to severance payments for
individually dismissed employees.
Finally, Lars-Erik Borge tested the
empirical validity of the MeltzerRichard hypothesis using a microeconomic study of the tax structure in
Norway: his work showed that more
equal income distribution implies a shift
in the tax burden from property taxes to
user charges as the hypothesis would
suggest.
(continued on page 6)
FACULTY NEWS
The Munich Economics Alumni Club’s
Dissertation Prize 2001 has been
awarded to Patrick D’Souza. The 2001
prize for excellence in teaching, jointly
awarded by the Munich Economics
Alumni Club and the Economics Faculty
has been awarded to Antonio Garcia
Pascual. Both prizes were presented on
16 May 2001 at the Annual Meeting of
the Munich Economics Alumni Club,
held at the Munich Re Society’s
facilities.
Professor Klaus Schmidt has been
awarded
the
Berlin-Brandenburg
Academy of Science Prize. This is the
first time that the prize, which is to be
given every two years for outstanding
research, has been awarded.
5
No. 3 • August 2001
CESIFO SUMMER CONFERENCES
(CONTINUED)
WORKSHOP ON PUBLIC PENSIONS
This workshop took place on 2nd-3rd
May, 2001, in Munich and brought
together 20 leading experts in the
economics of public pension systems.
Pension reform is one of the key political
questions in most industrialised countries
which have to cope with ageing societies.
In order to come up with sensible reform
strategies to avoid serious mistakes during
this reform process, a better understanding
of the underlying economics is essential.
Invited keynote speakers were Pierre
Pestieau (University of Liège, Catholic
University of Louvain and DELTA) and
Gary Burtless (The Brookings Institution). The presentations of recent theoretical and empirical research gave a
survey of different reform issues and
promoted international comparisons of the
differing views on how to address the
pension problem.
Among other well-known economists,
Henning Bohn (University of California at
Santa Barbara), Alessandro Cigno
(University
of
Florence),
Eytan
Sheshinski (The Hebrew University of
Jerusalem), and Harrie Verbon (Tilburg
University) discussed various topics in
economics of old-age security: the
demand and welfare of annuity markets,
risk sharing of private old-age provision
by innovative government debt management, incentives for retirement decisions
and second-best tax policies, the effects of
pension systems on fertility behaviour,
and voting on pension systems in
representative democracies and “with
one’s feet” in communities with several
countries, like the EU.
Gary Burtless compared the pension
systems in Germany and the USA in his
keynote speech and assessed the urgency
for fundamental reforms. From his point
of view, the critical issue is the
development of the output produced by
future workers and the future capital
stock. If productivity grows rapidly,
retirees can be generously supported and
active workers will enjoy increases in
their after-tax income under both public
pension programmes and a system of
private investment accounts for old age
provision.
The keynote speech given by Pierre
Pestieau addressed the question “Are
we retiring so early?” He explained
why people are retiring so young and
why it might be difficult to reverse a
trend that damages social security
systems which were previously running
smoothly. One reason referred to
necessary distortions towards early
retirement of less productive and
unhealthy workers in a second-best
world. Another explanation was that
reforms towards later retirement
involve less redistribution and lower
utility for the poor workers in the
transition periods.
The discussion of the stimulating
presentations was very lively and gave
rise to further research issues to be
pursued in the future.
RF
CESIFO CONFERENCE ON
GROWTH AND INEQUALITY
On 18-20 May 2001 CESifo hosted a
three-day conference on Inequality and
Economic Growth. The academic
programme was organised by Theo
Eicher and Stephen Turnovsky. Theo S.
Eicher received his Ph.D. at Columbia
University, NY, in 1994 and is now
Associate Professor of Economics at
the University of Washington in
Seattle. Stephen Turnovsky received
his Ph.D. from Harvard University in
1968 and is now Castor Professor of
Economics at the University of
Washington.
The conference featured both empirical
and theoretical work on inequality and
growth, with the focus on direct policy
applications. The topics of the
conference concentrated on five major
themes: the influences of poverty,
transition, political economy, taxation
and technology on inequality. Papers
on these issues were presented by
leading experts in the field, including
Francois Bourguignon, Itzhak Zilcha,
Danny Quah and William Easterly. A
follow-up conference on the same topic
will be held in January 2002, and the
refereed papers are scheduled to be
published in an MIT Press volume.
FW
6
BOOM-BUST CYCLE
(CONTINUED)
a large extent, denominated in foreign
currency and channelled to the nontradable sector. In addition, loans are
guaranteed by governments, at least
implicitly. Under these circumstances,
he argues that it becomes apparent why
currency crises have frequently erupted
in the absence of any major external
shock and in economies with seemingly
strong macroeconomic fundamentals. In
these episodes, a small incipient
reduction in capital inflows has been
followed by a significant real exchange
rate depreciation. Since debt was largely
denominated in foreign currency, the
depreciation has induced widespread
bankruptcies and a collapse of new
lending. He further shows that in the
aftermath of a crisis there is typically an
asymmetric recovery. The non-tradable
sector suffers a credit crunch and a
protracted recession, while the tradable
sector tends to grow vigorously after a
short-lived decline.
During his stay in Munich, he will give a
lecture on boom-bust cycles in emerging
markets as well as a workshop, where he
will present an outline of his research
project on this issue with Frank
Westermann. The results of this project
will be published in the CESifo book
series with MIT-Press.
FW
THE ROLE OF SPILLOVERS AND FIXED
COSTS (CONTINUED)
Kjetil Bjorvatn, CES visitor in September
also be expected to have a less mobile tax
base, and hence a greater ability to tax
and redistribute. With larger inequalities
in distribution, international tax
competition can be expected to be more
intense, resulting in lower equilibrium tax
rates, and thus less redistribution in the
economy.
HB
No. 3 • August 2001
VENICE SUMMER INSTITUTE 2001
From 15 July to 22 July 2001 CESifo
organised the second Venice Summer
Institute in co-operation with Venice
International
University.
Three
workshops dealt with financial crises,
environmental
economics
and
industrial organisation. Each workshop
was opened by a keynote speaker who
is a leading scholar in the respective
field.
How can financial crises be predicted
and what has been learned from recent
financial turmoil? Andrew Rose, UC at
Berkeley, reviewed the current
literature on this issue. The empirical
work on past financial crises provides a
good overview of their causes.
However, he concludes that empirical
analyses are ahead of theory, which
limits the predictive power of the
literature. Rose proposed a further
theoretical underpinning, for instance,
by pursuing a microeconomic approach
to financial crises. The papers
presented in the ensuing workshop
ranged from theoretical analyses of
bailout
policies
to
empirical
investigations on the choice of capital
controls. Aaron Tornell explained the
empirical observation that twin crises
are preceded by lending booms. In his
model the imperfect enforceability of
credit contracts and the existence of
bailout guarantees can account for the
stylised fact. Additional papers on
bailout policies were presented by
Hans Gersbach and Olivier Jeanne.
Dalia Marin showed the importance of
barter trade in partially solving the
liquidity problem in the latest Russian
banking crises. Craig Burnside shed
light on the issue whether the fiscal
costs of the Asian crisis have either
been financed by higher inflation or by
a devaluation of outstanding public
debt. Helge Berger analysed the factors
governing the decision of whether to
impose capital controls. In his paper the
switch to a flexible exchange rate regime
in many countries can partially explain
the abolition of capital controls in the
past. Further papers were given by
Gaston Gelos, Romain Ranciere and
Chandima Mendis.
over green taxes and emission levels
were the focus of Karl-Gustaf Löfgren
and David Bradford’s papers: other
presenters were Klaus Conrad, Olaf
Hölzer, Christian Gollier and Nathalie
Simon.
In his keynote speech for the workshop
on environmental economics Richard
Arnott, Boston College, reviewed
various models on congestion pricing as
a tool to improve the efficiency of urban
traffic. Despite the richness of the
theoretical results, road pricing is rarely
used in practice. The divergence between
theory and policy is a clear indicator for
the need to extend the existing theory.
For instance, extending the basic
approach by modelling driving
behaviour during rush hours or by
incorporating parking search allows
better understanding of how the usage of
roads should be priced.
What are the efficient access prices and
interconnection fees for allowing
entrants access to an incumbent’s
network? How can efficient entry in
network industries be achieved? These
were some of the questions posed by
Mark Armstrong, Oxford University, in
the keynote speech for the workshop on
industrial organisation. Armstrong
proposed a universal service fund to
prevent entrants from only servicing
low-cost rural areas. An output tax on
services delivered in these areas used to
finance services in high-cost areas is
the appropriate tool to prevent
inefficient cream-skimming. The issue
of setting appropriate access prices was
also raised in papers by Toker
Doganoglu, Marco Haan, Justus
Haucap and Steffen Hoernig. Elmar
Wolfstetter analysed the auction design
in the recently conducted Swiss
spectrum auction. He found that the
poor performance of this auction was
due to an ill-specified auction format
rather than to bad luck. In particular, the
fact that the number of licences were
predetermined reduced competition in
the auction process, thus yielding low
auction revenues. Several papers dealt
with highly relevant topics on what is
often termed the “new economy”. Huw
Dixon explored the relationship
between technological change and
stock market valuation. Kai Konrad
analysed the profitability of mergers
and collusion in contests. Papers by Jay
Pil Choi and John Evans demonstrated
how entry can be deterred by
incumbents.
Finally,
Diana
Barrowclough explored the optimal
regulation of the programme diversity
in the broadcasting market.
Several papers presented at the
workshop addressed the question of how
car ownership ought to be subsidised or
taxed in order to control traffic
congestion and emission. Don Fullerton
analysed the appropriate tax and subsidy
combination for the control of car
pollution while Bruno de Borger
presented an optimal taxation approach
to car ownership. Edward Calthrop
provided an argument for subsidising
auto-commuting and David Newbery
highlighted different forms of urban
congestion charging in theory and
practice. A paper on the implications of
environmental
tax
differentiation
between the production and household
sector—a policy scheme which has only
recently
been
implemented
in
Germany—was given by Christoph
Boehringer. Ian Parry questioned
whether Britain or the US have the right
gasoline tax. The difficulties in
achieving international co-operation
Bulletin
7
No. 3 • August 2001
NEW CESIFO RESEARCH AREA
RESEARCH NETWORK AREA
CONFERENCES
In addition to the three existing research
areas run by Peter Birch Sörensen, Jonas
Agell and Paul De Grauwe, CESifo is
opening a new research area in Industrial
Organisation to be headed by Christian
Gollier, a distinguished scholar in
various fields of Microeconomics.
The first CESifo Area Conferences were
held in the new CESifo conference
facilities at the Ifo Institute, Munich, in
Spring 2001. The CESifo area conferences are regular meetings at which
CESifo members can meet to discuss
each others’ current research in a
particular field. Thus, they do not focus
narrowly on a particular theme but are
intended to give a broad overview of the
current research undertaken by network
members working in the area.
between Euroland and the US or, for
example, to a reduced interest in holding
the deutschmark in Eastern Europe,
could not be settled.
The CESifo Area Conference on Public
Sector Economics held on 4-5 May 2001
was organised by Area Co-ordinator
Peter Birch Sörensen. 21 papers were
presented at the conference: topics
ranged from public good provision, tax
competition, the political economy of
redistribution to the political economy of
federations. The conference concluded
with a panel discussion on Directions for
Future Research in Public Economics.
The panellists (Sören Blomquist, Dieter
Bös, Eckhard Janeba and Efraim Sadka)
identified the most significant recent
developments in the field of Public
Economics and the most important
topics for current and future research in
the area, from a theoretical perspective
as well as from a policy perspective.
Members at the Area Conference on
Employment and Social Protection
Christian Gollier is Professor of
Economics at the University of Toulouse
and the Ecole Polytechnique, Paris. He
has specialised in the economics of
uncertainty and information with
applications to the functioning of risksharing markets (insurance, credit,
stocks), and to environmental economics. He currently serves as an Associate
Editor for the Journal of Risk and
Uncertainty, the Journal of Risk and
Insurance, Management Science, and the
Geneva Papers on Risk and Insurance
Theory.
Christian Gollier, area co-ordinator for
Industrial Organisation
The goal of the Industrial Organisation
area of the CESifo research network is to
promote co-operation in research on the
functioning and regulation of markets.
Interests covered by the new area include
issues of antitrust, corporate governance
and contract theory, cost structures,
procurement, auctions, microstructure of
financial markets, solvency issues and
regulation. To support and facilitate
high-quality research in these fields,
CESifo will organise conferences specifically for network members working in
Industrial Organisation. Detailed information on these conferences will be
circulated in due course.
MK
Bulletin
Why has the value of the euro fallen?
How will European monetary policy be
influenced by the wage-negotiation
behaviour of the unions? What are the
determinants of central bank independence? These were some of the issues
examined at the CESifo research
network conference on “Macroeconomics and International Finance” on 11-12
May in Munich. Twenty-five participants
from ten countries gathered to discuss
thirteen papers dealing with current
policy problems in macroeconomics and
international finance. In particular, the
recent Euro devaluation led to a lively
discussion among the participants.
However, the issue of whether the
weakness of the euro is attributable to
interest rate and growth differentials
On 29-30 June, the third area conference
focused on social policies and employment, and on the theoretical and
empirical links between the institutional
characteristics of the labour market and
economic performance. Jonas Agell,
Employment and Social Protection Area
Co-ordinator and conference organiser,
welcomed 24 participants from 10
countries to discuss 16 papers. One
major aim of this conference was to
bring together labour market economists, econometricians and macroeconomists. The papers presented thus dealt
with a wide range of questions. Is there
a race to the bottom in social standards
due to European integration? Do capital
market imperfections influence structural unemployment? Why do Indian
children work and is it bad for them?
How does technological progress affect
real earnings and the unemployment rate
of lower skilled workers? These and
other topics met with lively discussion.
The differing perspectives of macroeconomists and econometricians were
underlined once again in the panel
discussion. Panellists Torben Andersen,
Nils Gottfries, Andrea Ichino and
Lawrence Kahn outlined the most
important topics for future research on
employment and social protection from
macroeconomic, labour market and
microeconometric perspectives.
UH/MK
Munich Society for the Promotion of Economic Research (Münchener Gesellschaft zur Förderung der
Wirtschaftswissenschaft, CESifo GmbH) is a joint initiative of Ludwig-Maximilians-Universität 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: Ulrich Hange (UH), CESifo Editor: Rebecca Forwood (RF), Ifo Editor: Heidi Sherman (HS). Contributors:
Helge Berger (HB), Mirja Bopst (MB), Christian Kelders (CK), Marko Köthenbürger (MK), Silke Übelmesser (SU),
Frank Westermann (FW).