Causes of and Remedies for the People’s Republic of China’s External Imbalances: The Role of Factor Market Distortion

The current account surplus of the People’s Republic of China (PRC) has drawn much foreign and domestic attention. This paper focuses on the reasons and remedies for the PRC’s current account surpluses. Rather than deploying the standard explanations, we argue that asymmetric market liberalization and the related factor market distortion is the root reason for the PRC’s external imbalances. These cost distortions have artificially lowered PRC production costs, raised profits, and improved their products’ international competitiveness which has not only stimulated the economy, but also brought about severe structural risks. We completed a crude estimation for factor cost distortions in the PRC during 2000–2009 which matched its current account surpluses quite well. In order to rebalance the economy, we recommend that the PRC should adopt a comprehensive reform package focusing on removing the factor market distortions.prc; current account surplus; economic rebalancing; exchange rate; factor market distortion

Estimating Future Consumer Welfare Gains from Innovation: The Case of Digital Data Storage

We develop a quality-adjusted cost index to estimate expected returns to investments in new technologies. The index addresses the problem of measuring social benefits from innovations in service sector inputs, where real output is not directly observable. We forecast welfare gains from two U.S. Advanced Technology Program innovations equaling 25%-50% of expected price, and aggregate consumer benefits of $1-$2 billion, relative to trends in existing technologies. Our model’s probabilistic parameters reflect uncertainty about prospective outcomes and in our hedonic estimates of shadow values for selected product attributes. The index can be readily adopted by research and development (R&D) managers in industry and government.

The Stability and Growth Pact from the Perspective Of the New Member States

The purpose of this paper is to examine the fiscal characteristics of the new members in the light of the requirements of the SGP and the criticisms levelled against the Pact and to see in what ways their initial conditions differ from those faced by the current euro zone countries in the run-up to the adoption of the euro. Overall, because of the lower debt levels and greater yield convergence already achieved, the new members will be able to rely less on gains from yield convergence than the current euro zone members were able to do. EU accession will also have a negative net impact on the budgets of the new members in the early years of membership. We also look at the cyclical sensitivities of the budgets and find that in the new members the smoothing capacity of the automatic stabilizers might be weaker than in the current euro zone members. Beyond these general characteristics, we also emphasize that there are large differences in the starting fiscal positions of the new members. Some of the policy implications of our findings are discussed.http://deepblue.lib.umich.edu/bitstream/2027.42/40095/3/wp709.pd

The future of the USO - Economic rationale for universal services and implications for a future-oriented USO

Universal service obligations (USO) in the postal sector currently enjoy considerable attention among politicians, practitioners and academics. The primary areas of interest have been the viability, costing and funding of the USO in a completely liberalized market. However, the purpose and the scope of the USO itself have so far not been questioned fundamentally. In this paper we first analyze the possible rationale for USO from an economic point of view. Then, we discuss the impact of converging postal and telecommunications markets on potential alternative means to provide USO in a more efficient way.Universal service, USO, covergence, postal sector

The Quality of Insurance Intermediary Services - An Analysis of Conduct and Performance in the German Market of Insurance Intermediation

Based on a sample of 946 German insurance intermediaries, the factors that affect the quality of the information services provided by them are studied using OLS-estimations. Applying a search theoretical approach, we analyze the impact of supply and demand side variables on service quality. Besides, the working of signaling devices (like reputation, advertising or certificates) to reduce asymmetric information with respect to the service quality of insurance intermediaries is examined. The results obtained support the main hypotheses derived from industrial organization theories as to the poor working of quality competition under incomplete and asymmetric information on the side of consumers. Thus, public policy should concentrate on increasing transparency about intermediaries' (in-)dependence from insurance companies and improve consumers' financial literacy to raise the overall quality of the information services provided by insurance intermediaries.Performance of Insurance Distribution Systems, Information Quality

E-exchange and the Boundary between Households and Organizations

The new information and communication technology, ICT, induces households to take over tasks from firms and government agencies, using tools and systems provided by these very same organizations. The result is often joint production activities. We argue that the importance of ICT for the exchange process between households and organizations is underestimated by only considering the consequences for the last stage of the process, i.e., the final purchase of goods and services. Our analysis of household behavior utilizes a modified version of Gary Becker’s model of the household as a combined producer-consumer.internet information, e-exchange, household production, co-production, household power, exit/voice

MARKET STRUCTURE AND MORTGAGE PRICING: THE ROLE OF INFORMATION IN FIRM AND CONSUMER BEHAVIOR

This dissertation analyzes information, market structure, and firm pricing strate-gies. I begin the dissertation with an analysis of the market structure of the mortgage in-dustry. I find that the configuration of the mortgage market at its present state is vastly different than its historical structure. The reduction in the cost of transmitting informa-tion has increased the collaborative environment and facilitated the dis-integration of the supply chain. Generally, the mortgage industry has been successful at reducing principal-agent problems and minimizing asymmetric information concerns that arise in segmented markets. In the first essay I provide a theoretical explanation of the effect of the internet on market outcomes. Search models assume that the reduction in search frictions would lead to competitive markets. However, I argue that gatekeepers operating in online markets may create an anticompetitive effect, in addition to reducing the consumers’ search cost. Therefore, the conduct of the gatekeeper can cause prices in online markets to be higher than in retail markets and provide online firms with larger profits. In the second essay “I empirically examine the role of the internet and Internet Comparison Search sites in reducing consumer search costs and their effects on the prices consumers pay for mortgages. Additionally, I expand the study to test for the effects of the internet on firm profits. Using a unique data set, I examine a mortgage firm’s pricing strategies and profits in online and retail markets, and find evidence of market power in online markets that do not exist in retail markets. The presumed benefits to the consumer from the reduction of search cost are offset by the anticompetitive environment in online markets. In the final essay, I examine a mortgage firm’s portfolio choice. I investigate the loan characteristics that affect the firm’s decision to retain mortgages as part of its own portfolio. I find that the decision to retain loans as a lender is driven by unobservable qualities. The firm does sort loans by quality, but it also prices non-brokered loans lower based on unobservable qualities. The sorting behavior suggests that asymmetric information exists between the lender and the secondary market

The Stability and Growth Pact from the Perspective Of the New Member States

The purpose of this paper is to examine the fiscal characteristics of the new members in the light of the requirements of the SGP and the criticisms levelled against the Pact and to see in what ways their initial conditions differ from those faced by the current euro zone countries in the run-up to the adoption of the euro. Overall, because of the lower debt levels and greater yield convergence already achieved, the new members will be able to rely less on gains from yield convergence than the current euro zone members were able to do. EU accession will also have a negative net impact on the budgets of the new members in the early years of membership. We also look at the cyclical sensitivities of the budgets and find that in the new members the smoothing capacity of the automatic stabilizers might be weaker than in the current euro zone members. Beyond these general characteristics, we also emphasize that there are large differences in the starting fiscal positions of the new members. Some of the policy implications of our findings are discussed.EU enlargement, fiscal policy, fiscal rules, Stability and Growth Pact

An Empirical Investigation on Provider Pricing in Online Crowdsourcing Markets for IT Services

Pricing in online markets has been of much interest to IS researchers, particularly for IT services. In this paper, we theorize and empirically examine three primary factors that affect provider pricing of outsourced IT services: production cost, competitive dynamics and frictional cost. We test the respective role of each of these three complementary pricing strategies with archival data from a leading global online marketplace that specializes in the outsourcing of IT services. The results from our econometric analyses confirm that, besides production cost, service providers also account for the information signals about competing providers’ quality when pricing their services, reflecting the rule of market competition and dynamics. Furthermore, service providers adjust their prices for different service outsourcers with varying perceived frictional costs, which indicates, although online markets are vaunted to reduce transaction costs that outsourcers would otherwise incur offline, they creates new types of frictional costs between providers and outsourcers

Hot and Cold Seasons in the Housing Market

Every year during the second and thirdquarters (the "hot season") housing markets in the UK and the US experience systematic above-trend increases in both prices and transactions. During the fourth and first quarters (the "cold season"), house prices and transactions fall below trend. We propose a search-and-matching framework that sheds new light on the mechanisms governing housing market fluctuations. The model has a "thick-market" effect that can generate substantial differences in the volume of transactions and prices across seasons, with the extent of seasonality in prices depending crucially on the bargaining power of sellers. The model can quantitatively mimic the seasonal fluctuations in transactions and prices observed in the UK and the US.housing market, thick-market effects, search-and-matching, seasonality, house price fluctuations