Institut für Volkswirtschaftslehre
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Publication A monetary-fiscal theory of prices in modern DSGE models(2018) Schröder, Christian Philipp; Spahn, PeterStarting with the Eurozone crisis in 2010, fiscal variables such as the government budget position and public debt of certain member countries as well as the design of the European Monetary Union as a whole came under close scrutiny again. Furthermore, as a consequence of the global financial crisis, the economic profession faced accusations that, using the established ‘workhorse models,’ it was not able to provide answers to the pertinent questions of the time. From the perspective of economic theory, two main issues can be outlined against this background: (1) How do the so-called DSGE (dynamic stochastic general-equilibrium) models work which form a quasi-consensus in practice, research, and teaching nowadays? This relates especially to determinacy, that is, the mathematical property of being able to draw unique conclusions from a given set of assumptions. (2) What roles do the main fields of macroeconomic policy---fiscal and monetary policy---play in this? The exposition of these items is carried out within a formally consistent theoretical model which adheres to common standards and strikes a balance between staying general enough for a broad range of approaches and being sufficiently specific to yield tangible results. Following a brief introduction, Chapter 2 presents a microfounded (‘baseline’) general-equilibrium model that acts as a foundation for subsequent analysis. The only substantial exception is the excursus in Chapter 3. It deals with interactions between the entities of the consolidated government sector, namely the treasury and the central bank, and in doing so also touches on traditional models which cannot be reconciled entirely with modern theory. One of the main aspects is the “unpleasant monetarist arithmetic” that describes the long-standing explanation for fiscally induced inflation. The fourth chapter then takes up the baseline model and ‘closes’ it by defining monetary as well as fiscal policy, both of which can be active (that is, dominant) or passive. Resulting from this classification are two stable macroeconomic regimes (monetary or fiscal dominance) plus two undesirable outcomes (explosive instability or indeterminacy of central model variables). Monetary dominance is tantamount to the prevailing world view—central banks can independently pursue a measure of price stability while governments have to follow a sustainable (Ricardian) fiscal policy—whereas fiscal dominance gives rise to a “fiscal theory of the price level” in which the treasury sets budget surpluses without regard for other variables and monetary policy can be an implicit accomplice at most. This latter regime ultimately puts price stability into the hands of the treasury. Initially, the only public liability is debt (there is no money at this stage); however, the is model is able to determine unique price levels in the stable regimes. Chapter 5 introduces several isolated complications to the model described so far. One is the role of money, especially in the fiscalist model variant; it shows that the main results remain unchanged if monetary policy is conducted via money-supply instead of interest-rate policy. Further considerations are the zero lower bound on interest rates (in a graphic analysis) as well as limits to public-sector liabilities. Subsequently, Chapter 6 applies the baseline model of Chapter 2 to the open economy—more precisely, a monetary union consisting of two countries. Since monetary policy is supranational here, outcomes crucially depend on national fiscal policies. While the baseline model assumes flexible prices, Chapter 7 adds the considerable complication of nominally rigid prices. A mostly ‘plain-vanilla’ New-Keynesian model emerges which, following common practice, is then linearized and simulated in Matlab/Dynare. At the core of the analysis lie the two stable regimes carved out in Chapter 4. The central implications of the monetary-fiscal theory derived so far are adjusted gradually, but remain in place generally. Towards the end, the thesis highlights empirical issues (verifiability of the regimes, historical case studies). Finally, the results obtained beforehand culminate in a comprehensive discussion of the monetary-fiscal theory, including a distinction from traditional approaches. Chapter 10 concludes.Publication Ambidextrie in Netzwerken komplexer Produkte : Exploration und Exploitation in der Luftfahrtindustrie(2016) Guffarth, Daniel; Pyka, AndreasSince over 100 years, no comparable product exists that is so strongly related with engineering skills, pioneering spirit and the complex combination of materials, technique and knowledge, while being a prototypical example for high development and production cost at the same time. During the last century, industry changed dramatically through evolutionary and revolutionary technical and structural changes with government intervention playing a key role for industrial evolution. Today’s aircraft industry is in a growth phase which is determined by ramping up production scales which leads, in combination with the potentially new competitors from Asia and uprising regional aircraft manufacturers, to a situation in which the duopolists Airbus and Boeing are forced to shape their supply chains more efficient and effective. At the same time continuous technological novelties in subsystems and the high R&D-intensity are further recent challenges. With this dissertation a new industry evolution framework is developed which is coping with the complex products industries requirements by considering demand, state intervention and technological mechanisms. In complex product systems different subsystems of the artefact aircraft are in different stages of the technological life cycle at the same time. This is the reason why the classical implications between technology, product, and industry life cycle stages do not hold for complex products industries. I.e. solely focusing on the manufacturer level of an industry is not sufficient. Therefore in this dissertation, industry is defined as network. The design of this network as exploration or exploitation network focusing on product or process and/or both depends on time and manner. As permanently changing requirements are characteristic for complex products, organizations have to be able to be ambidextrous, i.e. to balance exploration and exploitation which is a decisive success factor in organizational long term survival. This requirement is analyzed on three levels within the R&D network of the European aircraft industry: knowledge development, structural and network topology, as well as on regional development. Key findings are the extension of ambidexterity in the network as well as in the supply chain over time. Therefore a change from cyclical to permanent ambidexterity is directed towards the suppliers. Additionally exploration is crowded out from the core of the network as routines and fossilized structure are established over time by repeatedly cooperating with other core actors. Therefore core actors use network peripheries as a vehicle to realize explorative projects and being permanently ambidextrous. As a consequence success factors for the sustainability of the European aircraft industry are the orchestration of network stability and network heterogeneity as well as the maintenance of the SME structure and interindustry linkages for usage of explorative learning.Publication Applied policy research through the lens of new quantitative trade models(2021) Walter, Timo; Jung, BenjaminThis cumulative dissertation consists of four essays focusing on the applied policy research in international trade. I conduct policy research on current and relevant trade subjects using state-of-the-art quantitative trade models. In the first two essays I analyze the impact of potential trade policies before they are implemented (ex-ante), while in the two later essays I examine policy issues and their effects after they were implemented (ex-post). The first essay is dedicated to the exploration of the trade and welfare effects of a potential free trade agreement (FTA) between the United States and Japan. Examining the effects of this bilateral FTA is of economic relevance as Japan is the largest trading partner for the United States without an established FTA. Based on the new quantitative trade model of Caliendo and Parro (2015) I consider various trade policy scenarios of such a potential FTA. In my counterfactual analysis I focus on the decrease of tariffs as well as on the reduction of different levels of non-tariff barriers. My findings indicate that the largest trade effects are driven by the reduction of non-tariff barriers. Furthermore, I compare the impact of a bilateral “Deep FTA” with the impact of the Trans-Pacific Partnership (TPP). The results show that the United States would prefer joining TPP; Japan would benefit the most of a “Deep FTA”. The second essay of my dissertation project concentrates on the abolition of import tariffs in the automotive sector between the EU and the United States. To study the potential policy implications of the so-called “Zero Tariff Solution”, this essay applies the Caliendo and Parro (2015) framework and the empirical approach of the first essay. Hereby, several possible trade policy scenarios are analyzed. The key result clearly shows that the highest welfare gains would be achieved by the “grand solution” where the EU and the United States reduce the automotive tariffs for all WTO countries. At the heart of the third essay lies the question about the underlying reasons for the steady decline of unemployment in Germany since the peak in 2005. In particular, I dissect the employment effect of the “rise of the East” (rise in trade between Germany and Eastern Europe) and that of the fourth stage of the German labor market reform (“Hartz IV"). By extending the Caliendo et al. (2019) dynamic trade model I can show that the “Hartz IV" reform decreases the short-term unemployment by 0.4 percent. I examine the productivity growth of Germany and Eastern Europe as potential drivers for the increased trade. I discover that the German productivity growth leads to a decrease in short-term unemployment, whereas the productivity growth in Eastern Europe enhances the German short-term unemployment slightly. Thus, the overall effect of the “rise of the East” driven by the productivity growth of Germany and Eastern Europe contributed to a slight decrease in German short-term unemployment. The fourth essay investigates social welfare in Germany while taking income inequality into account. The essay consists of two parts: In the first part (closed economy setting) we study the welfare effects of the German “Tax-Reform 2000”, the largest tax reform of the last decades. In the second part (open economy setting) we concentrate on the social welfare effects of the trade liberalization in Germany between 1995 and 2014. We apply the Antràs et al. (2017) approach which considers income inequality when focusing on social welfare. The results demonstrate that the “Tax-Reform 2000” contribute to a minor average annual social welfare growth. However, this additional social welfare growth strongly varies with the social planer’s inequality aversion. Additionally, we identify the optimal tax-progressivity for each year of the period. Furthermore, when studying the trade liberalization, we find support that a counterfactual move of the German economy of the year 2014 to the trade openness of 1995 would severely reduce the social welfare.Publication Die Arbeitsmarktsituation formal Geringqualifizierter in Deutschland : Folgen, Ursachen und Politikimplikationen einer veränderten Nachfrage nach einfacher Arbeit(2015) Rukwid, Ralf; Hagemann, HaraldThis dissertation provides an elaborate discussion of the labour market situation of low-skilled workers in Germany. It starts with a precise description of the employment and wage effects for unskilled labour in the context of a skill-specific structural change and the tendency towards a knowledge-based economy. The analysis focuses on the current job and income opportunities of low-skilled workers as well as the historical developments. This is followed by an overview of the theoretical determinants of the specific labour market problems of unskilled workers and the main explanations for a long-term demand shift away from low-skilled labour (trade vs. technology). Finally, different political approaches for an improvement of the job prospects of less-qualified persons in Germany are presented and evaluated. The focus here is on one hand on various strategies for enhancing flexibility of the German wage structure and on the other hand on a further expansion and improvement of the system of education and vocational training.Publication Business cycles and institutions : empirical analysis(2017) Kufenko, Vadim; Hagemann, HaraldThe cumulative dissertation covers diverse aspects of empirical analysis of business cycles and institutions. There are three research questions in focus. To address the interplay between business cycles and institutions, the first research question is formulated: could the Malthusian cycles be present in a frontier economy with abundance of land and which institutions could be responsible for the Malthusian regime and the transition from it? In order to consider the far-reaching implications of economic cycles for the development of economic thought, the second question is stated: can economic fluctuations quantitatively influence research output? To address the methodology of business cycle analysis, the third question is brought up: how may spurious periodicities emerge and how could one test for them? The main findings in the cumulative dissertation can be summarized as follows: i) it is shown that institutional arrangements may form economic constraints or build-up on the existing ones, responsible for the regimes in which cyclical fluctuations take place; ii) the interaction between the economic cycles and fluctuations in bibliometric variables representing research output in Economics as a science is analysed, and empirical evidence suggests the downswings of cycles stimulate more publications on the topic of crises and business cycles; iii) spurious periodicities emerge close to filtering bounds for real and simulated data after detrending, and it is demonstrated that simultaneous significance testing of spectral density peaks against the noise spectrum across different types of signals may help to reveal spurious periodicities.Publication Consumer prices : effects of learning algorithms and pandemic-related policy measures(2023) Buchali, Katrin; Schwalbe, UlrichWhen it comes to product prices, two major topics have dominated the public debate in recent years: One is pricing with the help of artificial intelligence, and the other is the price level, which has risen more than usual with the onset of the COVID-19 pandemic. Higher prices create a loss of consumer surplus and possibly total welfare, which is the reason this topic has become ubiquitous in political discussions. This dissertation contributes to the debate by extending the existing literature on algorithmic pricing, which is said to facilitate personalized pricing, as well as collusive behavior and to enhance the general understanding of how government measures enforced during the COVID-19 pandemic contributed to (short-time) price developments. Thereby, the first part of the thesis addresses the concern that tacit collusion might occur if firms employ learning algorithms, as several simulation studies have demonstrated that algorithms using reinforcement learning are able to coordinate their pricing behavior and, as a result, achieve a collusive outcome without having been programmed for it. We discuss several conceptual challenges as well as challenges in the real-world application of algorithms and show by or own simulations that resulting market prices strongly depend on the type of algorithm or heuristic that is used by the firms to set prices. In the subsequent part of the thesis we examine how a self-learning pricing algorithm performs when faced with inequity-averse consumers. From our simulations we can conclude that consumers sense of fairness, which have prevented firms from engaging in price discrimination in the past years, can be incorporated into firms pricing decisions with the help of learning algorithms, making differential pricing strategies more feasible. The discussion surrounding the above-average price levels in many countries during the COVID-19 pandemic is extended in the third part of the thesis. We present empirical evidence for the impact of government-imposed restrictions and, as a consequence of their enforcement, reduced mobility on consumer prices during the COVID-19 pandemic. We show that the stringency of government measures had a positive and significant impact on consumer prices mainly in the food sector, which means that more stringent measures induced higher consumer prices in these categories.Publication Contingent valuation and money attitudes(2015) Pelz, Sonna; Ahlheim, MichaelThe Contingent Valuation Method (CVM) is one of the most frequently applied techniques to assess and monetise the benefits of environmental improvements. This survey-based method aims to elicit individuals’ willingness to pay (WTP) for enhanced environmental quality by means of hypothetical payment questions. Analysts interpret stated WTP as the monetary equivalent of the utility gain an individual expects to experience due to a specific environmental improvement. In spite of its frequent use, the validity of WTP statements is recurrently questioned and analysts have pointed to several sources of bias, such as a poor CVM survey design or certain characteristics of the respondents. This dissertation focuses on respondent characteristics which hitherto have not been examined, namely individuals’ attitudes towards spending money in general. The disposition of a person to spend money is expected to systematically affect and possibly bias stated WTP. While money attitudes have been extensively studied in psychological research, they have never been considered to be of influence in the context of environmental valuation. Given this lack of research, this dissertation investigates, theoretically and empirically, the role of money attitudes in CVM surveys.Publication Dedicated innovation systems for local sustainability transformations in the Global South(2022) Mendoza Barajas, Elena; Ebersberger, BerndAs our global economic system draws closer to an irreversible breaking point, governments from both the North and South countries are called upon to reduce the environmental and social impacts of our fossil-based production and consumption patterns. From a neo-Schumpeterian view, innovation can prove instrumental in triggering such “transformational change” of our global economic system towards sustainability. This thesis posits that innovation and the largely endorsed theoretical framework of innovation system (IS) give a useful heuristic for the design of the economic policies that foster structural change. However, the promotion of the broader Sustainable Development Goals (SDG) of the 2030 Agenda requires an analytical lens that extends beyond IS technology-centric logic and adapts to respond to the variety of local contexts in both the Global North and South. An application put forward by this thesis is that of the concept of “Dedicated Innovation System (DIS)” (Pyka, A., 2017) as a revised approach to IS framework. DIS allows for the study of the often-overlooked and contextually unique qualitative dynamics that influence innovation processes in the informal and insecure institutional local contexts of developing countries. Specifically, this work focuses on DIS practical application in the Mexican local context. It builds upon the concept of “Dedicated Actors (DAs)” to examine the roles that system actors play in fostering directionality, legitimacy, and responsibility in DIS sustainability transformations. This thesis addresses the overall research question: How can Dedicated Actors (DAs) introduce a commitment to sustainability in DISs in informal and insecure institutional settings in Michoacán, Mexico? To respond to the research question, three sets of sub-questions are explored: (a) what are the characteristics of DAs that allow them to direct IS towards sustainable outcomes in informal and insecure institutional settings in Michoacán, Mexico; (b) what is the role of DAs in the building of collective capabilities in informal and insecure institutional settings in Michoacán, Mexico? and (c) what are the local capabilities that result from DIS in informal and insecure institutional settings in Michoacán, Mexico? As the focus of the thesis has been the study of innovation-led transformations towards sustainability at the local level, the research has prioritised the analysis of Dedicated Grassroots Actors (DGAs) through three practical case studies. A first research finding looks at the characteristics that define DGAs and positions them as agents of systemic change. DGAs are found to be actors that break out of the “paradox of embedded agency” because of their prior exposure to the institutional spheres that contrast local established beliefs; and that are “positively” embedded in local institutions, which allows them to circumvent existing cultural beliefs, and stretch societal norms. A second finding of this research refers to the roles of DGAs in the building of collective capabilities in informal and insecure institutional settings in Michoacán, Mexico. Three main roles have been identified: (1) conscientisation: DGAs create awareness in local people, foster critical reflection on alternatives to perceived feasible possibilities, and inspire a desire to improve their lives; (2) conciliation: DGAs play a strong role in fostering the creation of collective capabilities by enabling linkages between individual needs with wider sustainability communal goals, and coordinating community participation and active voice, as well as facilitating knowledge exchange and skills acquisition; (3) collaboration: DGAs have an active role in facilitating collaboration with regional and external actors. A third research finding relates to the creation of collective capabilities in informal and insecure settings in Michoacán, Mexico. It was observed that a general sense of collective injustice within these institutional settings encourages local communities to adopt collective strategies to resist injustices caused by external conditions. The local communities from the case studies, tended to develop resilience capabilities to face poverty traps, violence, and a lack of social mobilisation. Although the creation of collective capabilities was initially triggered by issues related to economic and social factors (that are generally viewed and valued as high priorities in insecure and informal settings), these capabilities have also served to address other environmental challenges affecting local communities (e.g. climate change, biodiversity loss, deforestation, etc.).Publication Efficiency of selected fiscal policy instruments(2017) Dekker, Vincent; Dwenger, NadjaThe thesis at hand intends to contribute to the understanding of behavioural responses to taxation by dedicating each chapter to the analysis of a different fiscal policy instrument. Chapter 2 focusses on the individual tax system in the Netherlands that exhibits tax brackets, as opposed to a smooth progressive tax system. The aim is to uncover the extent of behavioural responses to the kinks in the budget set that are created by the non-linear increases in the marginal tax rates at the tax brackets cut-off points. From the analysis it becomes evident that individuals react to jumps in the marginal tax rate. First, an extension to the classical bunching approach introduced by Saez (2010) and extended by Chetty et al. (2011) is provided. Because individuals face optimisation frictions, perfect bunching at the kink as predicted by theory is not observable. Rather, a window around the kink, known as the bunching window, is used in the analysis. Where prior research had relied on visual inspection to determine the size of the bunching window, a data-driven procedure is proposed instead, which is shown to be robust to variations in various parameters and takes away the researchers discretion in that matter. Thus, a methodological contribution to a comparably young, but growing field of research is made. Chapter 3 discusses the implications of the introduction of transfer pricing regulations (TPR) on intermediate goods trade. The chapter thus analyses an anti-avoidance measure implemented by many governments in recent years and evaluates the consequences for allocative and distributional efficiency. The empirical literature has shown that multinational enterprises (MNEs) utilise transfer prices to shift profits into (out of) low-tax (high-tax) jurisdictions. Evidence was given in prior literature that MNEs react sensitively to the introduction of TPR in reducing (increasing) their prices when they were overvalued (undervalued) before the implementation of regulations. Surprisingly, a reaction in quantities, i.e. shifts in production and trade flows, had not been analysed in the literature before. The results indicate a substantial quantity reaction and also a pricing reaction, which is shown to be in line with the literature. This suggests that before the introduction of TPR, firms shift more exports to low tax countries and less exports to high tax countries for tax optimising purposes. Following the introduction of TPR, especially the reduction in quantities traded with low tax countries is identified. Chapter 4 deals with a recently developed tax incentive for research and development (R&D), namely the intellectual property box (IP-Box). Said to foster innovation by the implementing governments, critics accuse the IP-Box regimes of providing yet another profit shifting opportunity for multinational enterprises (MNEs). The study assesses the implications that the introduction of IP-Box regimes has on innovation and shifting behaviour, in order to judge on the efficiency and effectiveness of such a policy instrument. Whilst most R&D incentives are ex ante tax incentives, i.e. incentives that act during the innovation process and before the innovative product was developed, IP-Boxes are an ex post tax incentive, thus only benefiting successful R&D. The analysis attempts to explore whether IP-Boxes are a local innovation enhancing device, as propagated by the countries implementing IP-Boxes, or merely facilitate profit shifting for MNEs by offering a substantially lower tax rate on income from intellectual property. The results clearly show that the shifting channel dominates the home innovation channel. Some evidence is found that home developed patents were crowded out by foreign developed and subsequently shifted patents. The total number of patents does not seem to react to the introduction of IP-Boxes, thus even questioning the global innovation enhancing effect of IP-Boxes. Given the nature of the country level data, it is not possible to investigate the different designs of IP-Boxes more thoroughly, although the implementation of a development condition should be part of every IP-Box regime. This ensures that, at least from a global or even European perspective, innovation must take place somewhere.Publication Essays on demographic change and R&D-based economic growth(2020) Tscheuschner, Paul; Prettner, KlausThis dissertation analyzes the economic growth effects of demographic change embedded in a framework of endogenous R&D. Substantial changes in fertility and longevity are the two main demographic features that all industrialized countries have experienced during the twentieth century and are still experiencing until today. Although the individual gains of higher life expectancy and better education, initiated by a quantity-quality tradeoff, are huge, there exist concerns about the macroeconomic effects. To improve the understanding about the aforementioned relationships, this work extends the existing literature on the growth effects of population aging by 1) introducing exogenous longevity into a growth framework with vertical innovations; 2) by endogenizing life expectancy in a growth framework with horizontal innovations; and 3) by examining the growth effects of basic scientific knowledge over the very long run. Chapter two contains the first paper titled “Longevity-induced Vertical Innovation and the Tradeoff Between Life and Growth”, which is joint work with Annarita Baldanzi and Klaus Prettner. In this paper, the positive effect of a longer retirement period on individual savings is utilized. A higher exogenous probability to survive to old age raises savings, placing a downward pressure on the market interest rate. On the production side, a lower interest rate increases the present value of holding a patent, which, in turn, makes R&D more profitable. As a result, R&D employment increases, leading to a higher frequency of quality improving ideas and, with it, faster economic growth. It is shown that the relationship between life expectancy and economic growth is strictly positive. In a welfare analysis, the utility gains of living longer are disentangled from the longevity-induced utility gains of higher consumption. The analysis concludes that the direct welfare gains of higher life expectancy, usually, outweigh the indirect welfare gains of faster economic growth. Chapter three contains a single-authored paper and is titled “Endogenous Life Expectancy and R&D-based Economic Growth”. As the title suggests, life expectancy is endogenized and increases in the public resources devoted toward health. Again, the longevity-saving-channel is present. Additionally, a quantity-quality tradeoff is introduced, such that parents have to decide on the number of children to have and on the childrens level of education. Besides the positive saving effect, life expectancy impacts positively on the labor force participation rate and negatively on the fertility rate. The reason is that adults need to work more (at the expense of having fewer children), to compensate for a prolonged retirement period. The feedback effects with production, characterized by horizontal innovation, are then analyzed in a calibrated version of the model. Using U.S. data, the model suggests that the overall effect of life expectancy on economic growth is positive and amounts to 11.9 % of the increases in the real GDP p.c. over the period 1960-2017. From a welfare perspective, the results indicate that the growth-maximizing size of the health care sector might lie beyond what is observed in most industrialized countries, nowadays. The finding that the size of the health care sector that maximizes life expectancy is substantially larger than the growth-maximizing size supports the view to not only consider the growth effects of health care. Chapter four contains the third paper which is co-authored with Klaus Prettner and is titled “The Scientific Revolution and Its Role in the Transition to Sustained Economic Growth”. Basic scientific knowledge is introduced as a necessary input in applied R&D and increases in the number of tinkerers in the economy and in their education. For low levels of development, fertility is high and educational investments are zero. Once income surpasses a certain threshold, education turns positive. Together with the consequent fertility transition, this marks the takeoff to sustained economic growth. It is shown that the growth rate of as well as the access to basic scientific knowledge is crucial in determining the timing and the magnitude of the takeoff. For low growth rates and low access, the takeoff is delayed by up to one generation because applied R&D takes longer to become profitable. In the extreme case of zero basic scientific knowledge, no takeoff might occur at all. The results improve the understanding of economic growth processes over the very long run and provide one possible explanation why some regions experienced the takeoff to sustained economic growth earlier than others.Publication Essays on modelling state-dependent dynamics : applications to financial time series(2019) Kuck, Konstantin; Jung, RobertThis thesis explores state-dependence in the context of financial market dynamics and cross-market linkages. Time-varying behaviour of financial markets is widely observed and implies that their price dynamics are characterized by state-dependence with regard to changing economic conditions. From a statistical perspective, this means that the (inter-)dependencies of financial variables are non-linear and cannot be adequately described in the context of linear models. Using non-linear econometric models like quantile (auto)regression and Markov-switching models, this thesis focuses on the following issues: 1. Are the dynamics among crude oil prices stable or time-varying? Are the crude oil markets generally integrated or regionalized? Is there a leading benchmark price? 2. How are the volatility dynamics of crude oil and precious metals affected by the level of volatility? Are there differences between crude oil and precious metals? 3. How fast do investors react to negative shocks in the equity market? Do negative shocks in the equity market affect the volatility of gold and what are the implications for the role of gold as a safe haven? 4. What can be learned from intra-day data about temporal dependencies and information processing in the foreign exchange (FX) market?Publication Essays on occupational choice(2013) Schlenker, Eva Gabriele; Wagenhals, GerhardOccupational choices have far-reaching consequences for young adults. Occupations do not only influence career opportunities and earnings. They also have an impact on status and reputation in society. The importance of occupational choice is reinforced because occupational choice is hardly reversible and, therefore, creates path dependencies in one's life. This issue is especially crucial if job mobility is low, as it is the case in Germany. Changes in occupations are less common in Germany in comparison to labour markets that are characterised by lower levels of employment protection such as Great Britain. Additionally, the importance of educational credentials is high in Germany compared to other countries. Therefore, occupational choices are hardly revisable and, if at all, at high monetary and non-monetary costs such as student fees and a loss of leisure time while participating in adult education. However, in times of aging societies and shrinking labour forces, occupational choices are not only a matter of an individual's well-being. The match of individuals and their occupations is also of crucial importance for the efficiency of labour markets because a worker's productivity is increased if the job requirements match the worker's skills. This thesis addresses the question of how occupational choices are affected by exogenous circumstances and social environments. When analysing occupational choices, it is crucial to recognise that occupational choices are highly ramified and cannot be modelled by a single self-contained decision process. Occupational choices must be understood as the result of decisions during childhood and adolescence because these decisions condition individual opportunities afterwards. Thus, education choices during childhood affect occupational choices to a large extent because the access to occupations depends on educational credentials. This thesis considers the described multi-layered structure of occupational choice by analysing different decisions made during childhood and adolescence and their implication on occupational outcomes. On the one hand, the thesis examines whether parents influence their children's education and occupational choices. One hypothesis is that parental influence can decrease the efficiency of these choices because choices do not simply present the child's abilities and interests but also parental interests. On the other hand, the consequences of occupational choices on labour market outcomes are analysed in terms of labour supply in this thesis. The effect of institutional settings on the labour market behaviour of different occupation groups is tested conditionally with respect to selection effects. The author shows different patterns of behaviour in terms of labour supply using the example of women in STEM. A review of the existing literature shows that shortcomings exist in the economic understanding of occupational choice. This thesis contributes to the improvement of this understanding and fills some of the existing knowledge gaps. The author's empirical findings show that parents substantially influence their children's education and occupational choices. It is not certain that parental influence improves the efficiency of these choices, however. Further research has to answer this question by measuring costs and benefits. Additionally, further research is needed to improve the understanding of differences in labour supply between occupational groups. This thesis shows that significant differences in the labour supply of women in STEM exist compared to women in other occupations. Future studies are required to answer the research question of how other occupational groups, such as sales or education, react to different institutional settings. These scientific results are crucial to develop policies that meet the needs of the occupational groups in focus and that take into account group-specific employment patterns.Publication Essays on public and private antitrust enforcement(2015) Smuda, Florian; Wagenhals, GerhardThis dissertation contributes to the economic literature on public and private antitrust enforcement by providing four chapters with innovative and policy-relevant contents that allow the deduction of important implications for the enforcement of antitrust law. In particular, econometric and statistical methods are applied and extended in order to explore the price-setting behavior of cartels in Europe and the status quo of cartel deterrence (chapter 2), to provide new insights regarding the quantification of cartel damages of cartel suppliers (chapter 3) and final consumers (chapter 4), and to analyze the relation between cartel breakdowns and merger activity in former cartel industries (chapter 5). Chapter 6 concludes the thesis by summarizing the main results and emphasizing the contribution of each preceding chapter to the literature on public and private antitrust enforcement. In addition, policy implications as well as new fields of research that arose from the results of the investigated subtopics are described.Publication Essays on tackling economic inequalities(2016) Fuchs, Benjamin; Osikominu, AderonkeThis thesis provides a differentiated picture of two interventions and one policy reform to alleviate economic inequality. In two chapters this dissertation examines whether out-of-school activities affect behavioral outcomes reflecting character, social and executive function skills. The first essay in this thesis analyzes the effect of performing sports on a regular basis on the formation of character and social skills. The findings confirm that sports is generally a social activity. For youths from less advantaged family backgrounds sports constitutes often the only quality pastime they engage in. Athletic involvement has beneficial effects on a broad range of character skills. These effects are largely driven by youths who do not engage in any other structured activity. Further, the effects can be interpreted as a broader effect of having access to an enriched social environment. The second essay examines the effect of working part-time while attending full-time schooling on the development of character skills and occupational choice strategies. Comparing adolescents who hold a job with adolescents who do not work, the former spend less time in front of a screen and invest more time in academic learning. Focusing on the time use of employed adolescents, working part-time has an ambivalent effect on time invested in other activities. It reduces their homework time as well as their nonproductive screen time. The results imply that holding a paid job while still in school reduces the uncertainty about own interests and talents and reduces the dependency on parents. A third essay evaluates the impact of the Tenancy Law Reform Act in 2001, a policy which targets to protect especially low-income households against rent increase. Germany is one of the European countries with the highest percentage of the population who lives in tenancies. This illustrates the importance of a functioning tenancy law, socially and economically. This essay analyzes the effect of the reform on the level of rents as well as on the residency discount. The two substantial parts of the reform were the reduction of the maximum rent increases for sitting tenants and the reduction of the minimum notice period until termination of a tenancy by the tenant. Estimating the effect over the distribution of rents, the reform shows a significant negative effect on rents that is stronger at higher quantiles. The annual residency discount increases with the reform during the first three years of a tenancy and vanishes thereafter. The evidence suggests that the reform was successful in curtailing rent increases especially for expensive apartments early in a tenancy. This thesis provides a differentiated picture on how economic inequalities can be alleviated. On the one side, this thesis focuses on the formation of character skills which are helpful for bringing especially unskilled people into employment and to better paid jobs. On the other side, this thesis focuses on a tenancy law reform that targeted to protect tenants against rent increases. While beneficial effects of structured leisure activities on the formation of character skills can be detected, one may be concerned that the tenancy law reform may not have been sufficiently targeted if considering the target of the reform to protect especially low-income households against rent increases.Publication Essays on the history of dynamic economic analysis(2013) Molavi Vasséi, Arash; Hagemann, HaraldThe subsequent three studies in the history of economic analysis ranges over a wide area of subjects. Part one, raises the following questions: To what extent is axiomatic general equilibrium analysis a rational reconstruction of ?Scottish Political Economy? as defined by the writings of David Hume and Adam Smith? How much is gained and how much lost by the axiomatic transformation of the invisible-hand proposition? What are the implications of negative results like the Sonnenschein-Mantel-Debreu demonstrations for the Scottish point of view? Did it reach deadlock, or is there still hope for the dominant trajectory in the history of economics? In contrast to the rich historical literature on the invisible-hand proposition, the present study does not level any paradigmatic criticism at neo-Walrasian analysis. Rather, by focalizing the most important results against the backdrop of Scottish Political Economy, it may inform theory choice within the neo-Walrasian paradigm. Part two translates F.A. Hayek?s informal capital theory into a dynamic equilibrium model. The focus is restricted to Hayek?s largely unrecognized contribution in Utility Analysis and Interest, being restated in The Pure Theory of Capital. The underlying premise is that Hayek adopts infant versions of modern analytical tools during his time at the London School of Economics such that a rational reconstruction of his capital theory by established neoclassical tools is admissible. The major result is that UAI and PTC contain a generalization of the Ramsey-Cass-Koopmans model. In concrete, Hayek provides the solution to an infinite-horizon deterministic social planner optimization problem in a one-sector economy such that the rate of pure time preference encapsulated in the discount factor increases in prospective utility. The endogeneity of myopia is due to intertemporal complementarities and accounted for by the modified Uzawa aggregator. A partial alliance with Frank Knight is established. Part three addresses Ludwig von Mises?s business cycle theory at maturity, as advanced in his opus magnum Human Action. In this work, Mises embeds the business cycle theory which he initially developed in Theorie des Geldes und der Umlaufmittel into the broad context of his methodological convictions. Whereas the initial outline of his cycle theory strongly relies on Böhm-Bawerk?s capital theory, its mature version is built upon a significantly altered framework of real analysis. The paper describes and evaluates the impact of Mises?s praxeology on his conceptualization of real analysis; it provides a simple model to depict and clarify Mises?s outline; it draws implications for his business cycle theory and its core prediction that ?any money-induced traverse by necessity reverses?; it argues that Mises?s core prediction ultimately depends on his barren analytical device; it concludes that Mises?s mature business cycle theory is a regression.Publication Essays on the impact of temporary agency work on wages and employment(2018) Baudy, Philipp; Beißinger, ThomasThe thesis contributes to the theoretical discussion of the effects of temporary agency work and picks up three different issues that have not been analyzed yet. It provides three theoretical models 1) to discuss the optimal economic behavior of firms and labor unions when firms threaten to use temporary agency employment in the bargaining process, 2) to examine the macroeconomic effects of the deregulation of temporary agency work that took, and still takes, place in many countries in the last decades, and 3) to study how the technological choice of firms in the economy changes due to the legal deregulation of temporary agency work. The first model focuses on the question of the optimal economic behavior of the bargaining parties. Developing a monopoly union model, it analyzes how and to what extent firms can strategically use the threat of temporary agency employment to dampen the wage claims of labor unions. Furthermore, the model discusses how labor unions optimally behave and respond to these threats. It is shown that labor unions may find it optimal to accept lower wages to prevent firms from using temporary agency workers. The decision of the labor union to oppose or accept the firms threat is based on the attempt to minimize the loss in its utility. While labor unions suffer from the potential use of temporary agency employment in terms of their utility, firms gain from increasing profits and an extended employment level per firm. If unions do not oppose temporary agency work, the model suggests that labor unions increase their wage claims for the remaining regular workers to a level that even exceeds the claims of the labor union if there is no threat at all. Hence, an intensive use of temporary agency workers in high-wage firms may be the cause and not the consequence of the high wage level in those firms. The second model concentrates on the effects of the deregulation of temporary agency employment on macroeconomic determinants like wages, unemployment, and the employment structure. Using the matching framework, it provides a first contribution that combines labor unions and temporary agency work in this modeling setup. Large firms produce differentiated goods employing regular workers that are organized in labor unions and, optionally, using temporary agency work for parts of the production. Furthermore, there is a special emphasis on the flows from temporary agency to regular employment, which is modeled as on-the-job search. The model shows that the deregulation of temporary agency work leads to a reduction in overall unemployment. Surprisingly, this favors regular employment due to lower wages that arise from the impact that the more attractive production alternative temporary agency employment has on labor union wage bargaining. The most interesting finding, however, is that there is a hump-shaped relationship between the degree of institutional deregulation of temporary agency work and its rate of employment. This is explained by the fact that voluntary non-institutional, firm-level regulations come into play and get the more important, the less regulated temporary agency employment is. They have a counter-effect on the costs of temporary agency work that is lowered by the deregulation. Additionally, even if the model does not conceal that individual workers suffer from declining wages, it shows that regular employment benefits from the deregulation of temporary agency employment. The third model examines how the technological choice of firms in an economy changes due to the availability of temporary agency employment as a production alternative that gets cheaper and, therefore, more attractive the less regulated it is. The model uses the matching framework with two types of jobs that differ in their productivity and workers that are randomly matched with temporary or regular job vacancies. The analysis reveals how the decision of firms with which technology to enter the market and to produce with changes with the deregulation of temporary agency employment. Regular and temporary agency workers produce the same good but use different technologies. Temporary agency work is less expensive to hire than regular workers as direct labor costs are lower. However, job destruction and labor turnover is higher in this employment type. The model rather intuitively suggests that the legal deregulation of temporary agency employment deteriorates the technology level used in the economy, leads to a more intensive use of the less advanced technology, and increases temporary agency employment. Regular workers are shown to suffer from declining wages while the labor income of temporary agency workers increases. However, the model also provides an advice for economic policy by suggesting that subsidies or other forms of support for directed investments in technological progress of more advanced technologies may be suitable to dampen the macroeconomic effects of the deregulation of temporary agency employment.Publication Forecasting DAX Volatility: A Comparison of Time Series Models and Implied Volatilities(2016) Weiß, Harald; Wagenhals, GerhardThis study provides a comprehensive comparison of different forecasting approaches for the German stock market. Additionally, this thesis presents an application of the MCS approach to evaluate DAX volatility forecasts based on high-frequency data. Furthermore, the effects of the 2008 financial crisis on the prediction of DAX volatility are analysed. The empirical analysis is based on data that contain all recorded transactions of DAX options and DAX futures traded on the EUREX from January 2002 to December 2009. The volatility prediction models employed in this study to forecast DAX volatility are selected based on the results of the general features of the forecasting models, and the analysis of the considered DAX time series. Within the class of time series models, the GARCH, the Exponential GARCH (EGARCH), the ARFIMA, and the Heterogeneous Autoregressive (HAR) model are chosen to fit the DAX return and realised volatility series. Additionally, the Britten-Jones and Neuberger (2000) approach is applied to produce DAX implied volatility forecasts because it is based on a broader information set than the BS model. Finally, the BS model is employed as a benchmark model in this study. As the empirical analysis in this study demonstrates that DAX volatility changes considerably over the long sample period, it investigates whether structural breaks induce long memory effects. The effects are separately analysed by performing different structural break tests for the prediction models. A discussion of the impact on the applied forecasting methodology, and how it is accounted for, is also presented. Based on the MCS approach, the DAX volatility forecasts are separately evaluated for the full sample and the subperiod that excludes the two most volatile months of the financial crisis. Because the objective of this work is to provide information to investment and risk managers regarding which forecasting method delivers superior DAX volatility forecasts, the volatilities are predicted for one day, two weeks, and one month. Finally, the evaluation results are compared with previous findings in the literature for each forecast horizon.Publication Four essays in the empirical analysis of business cycles and structural breaks(2015) Marczak, Martyna; Beißinger, ThomasBusiness cycle analysis has a long history in the macroeconomics literature and since its origins it poses a challenge for both empirical and theoretical research. The enduring interest in this research area is dictated by its high relevance for economic policy. Reliable information on the state of the economy plays a crucial role in the monitoring of the economy and in the policy-making process. This involves the choice of the method for extraction of a proper business cycle indicator. Moreover, the business cycle analyst also has to take account of structural breaks as well as seasonal and higher frequency movements of the series that can affect the properties of a business cycle indicator. Another reason for the keen interest in empirical business cycle research can be seen in the need to validate theoretical approaches. A prominent example is the debate on the cyclical behavior of real wages which evolved to one of the most lively and long--lasting debates in macroeconomics. This thesis tries to contribute to the literature under the aforementioned aspects. It offers a new methodological perspective with respect to the extraction of business cycles and detection of structural breaks. Furthermore, it sheds some light on the question of real wage cyclicality from the empirical point of view. The first essay proposes a new multivariate model based on a band-pass filter to construct business cycle indicators. Using this method and a dataset with monthly and quarterly US time series, two monthly business cycle indicators are obtained for the US. It is shown that the proposed method not only reproduces historical recessions very well, but it also performs good in terms of forecasting. The second essay for the first time in the literature combines indicator saturation as a general-to-specific approach to detect outliers and structural breaks with the structural time series model for the purpose of seasonal adjustment. The performance of the impulse-indicator and step-indicator saturation for detecting additive outliers and level shifts is tested in both a comprehensive Monte Carlo simulation exercise and an empirical application. The latter involves five European industrial production series. Its focus lies on the question whether the recessionary episode starting towards the end of 2008 can be described by the inherent model dynamics, or whether it represents a major structural change. In the third essay, stylized facts about the cyclicality of real consumer wages and real producer wages in Germany are established. First, various detrending methods are applied to estimate a business cycle and real wage cycles. The comovements between real wage cycles and the business cycle are then examined both in the time domain and in the frequency domain by resorting to the concept of the phase angle. According to the frequency domain results, the consumer real wage lags behind the business cycle. Moreover, it exhibits an anticyclical behavior in the short run, whereas in the longer run a procyclical behavior can be observed. For the producer real wage, in contrast, the results in the frequency domain are not clear-cut. The fourth essay compares the cyclical behavior of consumer and producer real wages in the USA and Germany. This study is the first one which employs wavelet analysis as a comovement tool in the context of the examined research question. From the findings of this study it can be inferred that the USA and Germany differ with respect to the lead-lag relationship of real wages and the business cycle. In the USA, both real wages are leading the business cycle in the entire time interval. The German consumer real wage is, on the other hand, lagging the business cycle. For the German producer real wage, the lead-lag pattern changes over time. In addition, the results show that real wages in the USA as well in Germany are procyclical or acyclical until 1980 and countercyclical thereafter.Publication Four essays on the impact of institutions, technological change, and globalization on labor market outcomes(2019) Cords, Dario; Beißinger, ThomasThe thesis picks up some modern labor market phenomena and contributes to the literature by developing four theoretical models to analyze the effects on labor market outcomes. In particular, it 1) examines how the decision of labor unions to merge or to stay independent depends on the degree of product differentiation, 2) investigates the macroeconomic effects of the deregulation of temporary agency employment, 3) discusses if low-skilled workers will be substituted by automation, and 4) studies how the technological choice of firms in an economy changes due to low-skilled immigration. The first model focuses on the question of the optimal economic behavior of labor unions under multi-unionism. Developing a right-to-manage model, it analyzes how the decision of labor unions to merge or to stay independent depends on the degree of product differentiation. The model predicts that labor unions have strict incentives to merge if the products are substitutable in consumption, while they want to stay separated for complementary products. The second model studies the effects of the deregulation of temporary agency employment on labor market outcomes such as wages, unemployment, and the employment structure. It develops a search and matching model with large firms that produce differentiated goods using regularly employed workers that are organized in labor unions and, in addition, temporary agency workers that may search on-the-job for regular employment. The model shows that the legal deregulation of temporary agency employment increases overall employment and the rate of regular employment. The rate of regular employment increases, since labor unions reduce their wage claims in response to the deregulation of temporary agency employment. As the most surprising result, the model predicts a hump-shaped relationship between the degree of legal deregulation of temporary agency employment and its employment rate. This is explained by voluntary, non-institutional firm-level agreements that restrict the use of temporary agency employment in the production and get more important, the more deregulated temporary agency employment is. The third model incorporates automation in the search and matching framework to reveal if automation creates technological, skill-specific unemployment. The model assumes one-worker firms that operate in a low- or high-skill intensive intermediate sector and employ low- or high-skilled workers, respectively. The two intermediate goods, traditional capital and automation capital in form of industrial robots, 3D printer etc. are used for the production of a final good. Automation capital serves as a perfect substitute for low-skilled labor and an imperfect substitute for high-skilled labor. The model shows that the accumulation of automation capital leads to the creation of technological unemployment. While the unemployment rate of high-skilled workers decreases, low-skilled workers suffer and get replaced by automation capital. Further, the model predicts that wage inequality between high- and low-skilled workers rises as the wage rate of low-skilled workers declines, while the wage rate of high-skilled workers increases. The fourth model examines how the technological choice of firms in a host country change due to an exogenous inflow of low-skilled immigrants. It uses a search and matching model that considers two type of firms that either use a basic technology or a more advanced technology. Workers match with vacancies randomly and consist of three groups: low- and high-skilled natives and low-skilled immigrants. While the skill distribution of workers is exogenous, firms may endogenously adjust their skill requirements. Another feature of the model is that it captures educational mismatch of high-skilled natives. The model rather intuitively suggests that an increase in low-skilled immigration causes firms to change their behavior and to shift their production towards the basic technology. As a consequence, low-skilled natives benefit from the influx of low-skilled immigrants, while the wage rate of high-skilled natives decreases, whereas their employment rate goes up.Publication Incentives to enforce and stimulate : microeconometric evidence from natural experiments(2020) Treber, Lukas; Dwenger, NadjaIncentives can be powerful tools to enforce behavior and to stimulate and steer the economy. However, due to the complexity of how incentives are perceived by economic agents, designing effective incentive structures is difficult. A better understanding of incentives enables policymakers to design such policies, ultimately increasing overall well-being. This thesis advances our knowledge on how incentives work, how they change behavior, and how to effectively use them.
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