Abstract We develop an economic geography model that integrates the constructed capital framework by Baldwin (1999. “Agglomeration and Endogenous Capital.” European Economic Review 43 (2): 253–80) with a task-based approach to explore automation and spatial agglomeration. First, we show that automated firms have an incentive to agglomerate in locations with large market demand. Consequently, they tend to locate in the central region instead of the periphery when trade freeness is high. Second, as the number of automated tasks increases, the agglomeration strengthens due to capital accumulation and scale economies driven by an increased demand for capital. Finally, since our model features demand- and production-side circular causalities, we derive a critical substitution threshold to determine which forces dominate the other.
This study examines the payout policies of modern state-owned enterprises (SOEs) using unique official statistics on German SOEs from 2003 to 2014. The findings reveal that agency conflicts significantly influence SOEs' payout behavior, leading to payout smoothing over time. Vertical agency costs, arising from owner-manager conflicts, and horizontal agency costs, stemming from owner-owner conflicts, are shown to intensify this smoothing. In minority-controlled SOEs, higher ownership dispersion further amplifies payout smoothing due to free-rider in monitoring. Our results highlight payouts as a disciplinary mechanism to mitigate agency costs. Overall, SOEs' payout policies are comparable to dividend policies of private-sector firms.
After the beginning of the war in Ukraine, energy prices in Germany increased drastically. The paper analyses responses of German firms to this energy price shock. A variety of measures and reactions at the firm-level are explored, such as substituting machinery and equipment by less energy consuming alternatives, a change of energy suppliers, the use of digital technologies to reduce energy consumption, the introduction of energy management systems, relocation or closure of energy-intensive activities, or replacing fossil by other energy sources. The analysis is based on data from the German part of the Community Innovation Survey. The econometric results show that a high affectedness by the energy price shock in 2022 triggers the substitution of machinery and equipment by more energy efficient alternatives. This measure in turn is correlated to a decrease of electricity consumption and oil use, and it promotes the substitution of fossil energy sources by renewables. From a policy perspective, energy price shocks and politically induced higher energy prices can be advantageous for a shift of energy use towards higher levels of energy efficiency and a substitution of fossil energies by renewables. However, such shocks can lead to negative short-term economic consequences in energy-intensive firms.
Despite increasing female labor force participation, gender differences in non-market work, such as housework and childcare, persist. By exploiting exogenous variation in the questionnaire of the German Socio-Economic Panel, I analyze how response behavior affects estimates of time use in a longitudinal setting. I find a causal impact of questionnaire design on the reported hours of non-market work within individuals over time. Both women and men report more hours of non-market work on weekdays when they are not additionally asked about their time use on weekends. This response bias is larger for men, both in absolute and relative terms, with men overreporting by 10 percent of their average weekday non-market work compared to 2 percent for women. As a result, gender gap estimates are biased downward. The findings imply the broader conclusion that the common practice of irregularity in questionnaire designs has important impacts even on questions asked regularly.
Internships are an important and often mandatory part of academic education. They offer valuable insights into the labor market but can also expose students to negative aspects of the working world, such as gender pay disparities. We provide first evidence of a gender pay gap in mandatory internships, with women earning up to 21 % less per hour than men. This gap is not due to women choosing higher-quality internships over higher pay. Factors such as field of study, risk aversion, competitiveness, the focus of the internship, and firm characteristics account for a large share of the gap. Further analyses show that the internship pay gap is broadly similar to the wage gap at labor market entry among graduates. We discuss potential mechanisms through which the internship pay gap may be related to the entry wage gap.
What is the contribution of containment policies to output fluctuations in Germany during the COVID-19 pandemic? We extend a macro-epidemiological model based on the evidence that efficiency and labor wedges are the key distortions in the neoclassical growth model that account for the GDP dynamics during the period. We find that the consumption and labor-supply effects of containment policies and the endogenous responses of households to pandemic-associated health risks can account for almost all weekly dynamics of output in Germany between the first quarter of 2020 and the second quarter of 2021. The containment policies are found to be responsible for especially large output losses during the pandemic, but the endogenous household responses appear to play an important complementary role. We simulate a counterfactual, laissez-faire type of response to the pandemic and find that not only would it not have avoided a sizeable recession either, but it would also lead to substantially higher losses in human life and stress on the German health service.
This article studies the heterogeneity of European climate policy effects within Germany (Lower Saxony and the rest of Germany) and between other member states of the European Union (EU). It uses a global Eaton and Kortum trade model to examine the EU emissions trading system (EU ETS) with the carbon border adjustment mechanism (CBAM) and reveals significant differences in policy effects across EU countries and within Germany. Under a medium CO 2 target, CBAM has a negligible average welfare effect on the entire EU while it can eliminate the carbon leakage caused by the EU ETS. Assuming a less stringent CO 2 target, CBAM creates a welfare gain of the EU, whereas, assuming a more stringent target, it creates a welfare loss compared with the EU ETS alone. More stringent CO 2 targets in the EU ETS increase the effectiveness of CBAM in reducing carbon leakage and hence global emissions. Because official and constructed regional data sets are often incomplete, outdated or not publicly available and their compilation and resolution are not standardized, the official public provision of a comprehensive, harmonized, up-to-date regional data set, at least with federal state level resolution, is advisable.
This article delineates the distinctions between the extant types of stepfamilies in Germany, with a particular focus on the financial responsibility of stepparents towards their minor stepchildren. By revealing the extent to which stepparent households shoulder this responsibility, we simultaneously uncover the inability or unwillingness of non-resident parents to provide financial support for their biological children. The likelihood of a stepfather assuming financial responsibility for his stepchildren – that is, stepping in for a non-resident father – is about 21 percentage points higher than that of stepmothers and 22 percentage points higher than that of stepparents in complex stepfamilies. Furthermore, the results of this study suggest that the likelihood of non-resident fathers providing support is contingent on the number of children in the stepfamily.
How shall publicly provided excludable goods be financed – by general taxation or user fees? The general conclusion of the existing literature is that exclusive tax financing is neither efficient nor desirable under widely shared distributive goals. A striking example is childcare because here fees are often made dependent on parents’ income. Given the rather clear arguments in favor of user fees for formal childcare, it is surprising to notice that some German states with leftist governments have abolished user fees and replaced them with pure tax financing. It is the purpose of this research to investigate the attitudes of politicians towards user fees for publicly funded childcare and to explore the justifications given for these attitudes. We do so by directly surveying members of eight federal state legislatures. The survey results confirm the experience of real political decisions in that left-leaning politicians tend to oppose parental fees. They do so mainly with the justification that “education must be free for all”. Right-leaning politicians tend to support fees for various reasons. We discuss how these results can be reconciled with the redistributive goals of leftist parties.
Consumer consent regulation is the cornerstone of modern data privacy regulation such as the European GDPR and the Californian CCPA. By ensuring that consumers can reject any harmful data collection, the regulation seems an effective tool for protecting consumers against price discrimination. By contrast, I provide the insight that consent regulation alone is ineffective because it provides firms with the loophole to commit to unattractive offers to dissenting consumers. Effective consent regulation therefore requires an explicit regulation of the firm’s dissent offer. This is informationally demanding; regulation that merely insists on “reasonable” (sequential rational) offers is ineffective.
In the German Empire, corporations almost always paid a dividend to their shareholders. Dividends have been cut or increased in line with the development of profits. We demonstrate that the target dividend and the average dividend tended to be nearly the same. If the dividend paid deviated from the target, we measure an extraordinarily fast return towards the target. Our analysis of the change in dividends, the payout ratio, and the dynamics of the dividend level provides evidence in favour of the agency theory of dividend policy. Companies with good investment opportunities paid comparatively high dividends. An improvement in shareholder protection weakened this effect. Best practice voting rights at the company level have systematically influenced dividend levels, the relevance of investment opportunities for the dividend policy and the speed of adjustment after a deviation from the target.
This study examines effects of mergers between Austrian banks from 2005 to 2018. Using matching techniques, we assess consequences for bank profitability and financial efficiency, as well as the impact on loan growth and a measure of social efficiency. Significant effects are observed in naive comparisons to non-merging banks, which almost entirely disappear after balancing with bank-level and environmental factors. This indicates that the average bank merger is neither value-decreasing nor value-enhancing. However, variation in individual merger success is huge and associated with several organizational and strategic factors, such as pursued cuts in personnel expenses or changes in market power.
Given the renewed scholarly interest in the crafts, this paper explores the nuances of crafts entrepreneurship through a personality-based approach. Our findings validate prior research on the general influence of broad and narrow personality traits on self-employment. However, our analysis also suggests that certain effects differ between crafts and non-crafts, most notably the role of the Big Five trait of conscientiousness – suggesting that there is something ‘unique’ about the crafts’ way of doing business that goes beyond firm size. In this way, we provide evidence that personality may affect self-employment differently depending on the sector or field of entrepreneurship.
Motivated by the recent increase in bank mergers, this paper examines the performance of German cooperative banks that merged between 2014 and 2019. We are particularly interested in whether elevated merger rates are due to bank inefficiencies or to challenging policy measures such as low-for-long interest rates. The results indicate that banks that perform relatively worse before and during the low interest environment exhibit a greater probability of becoming a target during this period. Consolidation generally occurs among low performing banks where large and well-capitalized banks merge with their small and inefficient peers. Ultimately, our results attribute the increased number of mergers to inefficiencies in the banking industry, as banks that exited the market were inefficient prior to the adverse low interest rate environment.
This paper takes the canonical Burdett-Mortensen model of wage-posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. But it is shown that a Rank-Preserving Equilibrium may fail to exist because employers have more monopsony power over existing workers than new recruits and that this non-existence can be a problem for plausible parameter values. It is shown how a Rank-Inverting Equilibrium may exist. It is argued that this problem is likely to occur in a wide range of search models.
We examine the transmission of monetary policy to bank interest rates in the euro area, using a rolling estimation. The results, using various fixations for the Euribor rate and different maturities for bond yields, suggest that the pass through of policy rates to bank interest rates was relatively stable prior to the use of unconventional monetary policy measures. After the use of unconventional policies, the pass-through multiplier from the Euribor rate and the short-term bonds increased, while the pass-through from longer-term bonds markedly decreased. It appears that unconventional monetary policy operations allow for bank lending rates to further decline, which could lead to higher lending, with potential financial stability issues arising. In addition to the excess liquidity created by asset purchases, factors such as credit risk and house price growth also appear to impact the pass through.
Using register data, we document that the average German labor market, defined by hires in combinations of 3-digit occupations, requirement levels, and commuting zones, is highly concentrated ( HHI ̄ $\bar{\text{HHI}}$ =0.257). By EU antitrust thresholds, 56 percent of these labor markets feature moderate or high concentration, covering 9 percent of workers. Concentration remained relatively stable between 2012 and 2023. The labor market delineation strongly affects the measured level of concentration but not its evolution, whereas the choice of the firm size variable has little influence. Concentration differs starkly across occupations and regions, and workers in complex jobs experience the highest levels of concentration.
Portfolio models typically ignore precautionary transactions demands for liquid assets, and models of precautionary demands typically ignore asset rate-of-return risk. If asset-holders are risk-averse, however, both transactions risk and rate-of-return risk affect demands for both liquid and illiquid assets, even when the two risks are independent of each other. We demonstrate this in a four-asset framework, and show that our integrated treatment produces unexpected and instructive results and insights. For example, (a) an increase in the expected return to risky securities increases the demand for M1, even when M1 is used entirely for transactions purposes, (b) an increase in the variance of securities returns reduces the demand for M1, and (c) an increase in the asset-holders’ wealth reduces her demand for M1. A broader framework for the study of money demand is thus called for.
Using linked vacancy-employer-employee data from Austria, we investigate how monopsony power affects firms' posting behavior and wage negotiations. Consistent with theoretical predictions, we find that firms with greater monopsony power post lower wages and offer fewer non-wage amenities, suggesting that wages and non-wage benefits are complementary. However, we find no evidence that monopsonistic firms demand higher levels of skill or education. Instead, our results indicate that they require more basic skills, particularly those related to routine tasks. On the workers' side, we find that employees hired in monopsonistic labor markets face significantly lower wages, both initially and in the long run. These lower wages are driven by both lower posted wages and reduced bargaining power, as well as reduced opportunities to climb the wage ladder later.
