Euroland: peak of the upswing - little evidence of a new economy

In the summer of 2000, the economic expansion in Euroland has continued at a rapid pace. However, a number of leading indicators suggest that the upswing will pass its peak in the second half of this year. Several reasons are responsible for the slowdown. The European Central Bank has corrected the expansionary course after the inflationary risks in the euro area had increased; households and firms experience a reduction of real income due to the deterioration of the terms of trade; finally the export boom is coming to an end as the world economy slows down somewhat and the effects from the euro depreciation slowly fade. Real GDP will rise by 2.9 percent next year. While output growth will slow down gradually and approach the growth rate of potential output, employment will continue to expand swiftly, and the unemployment rate will decline to around 8 percent by the end of 2001. Inflation will remain above the ECB's target of 2 percent for the rest of this year and decelerate only moderately in the course of next year. While external factors will lose their impact, the core rate of inflation will remain headed upwards. The situation of public budgets seems to improve as there will be large revenues from the sale of mobile phone licenses in a number of countries. European governments intend to use these receipts to reduce public debt. The savings in terms of interest payments should also not be used to raise public spending. Sustained fiscal consolidation requires that government expenditures increase at a lower rate than GDP over an extended period of time. This is also necessary to support the course of lowering the tax burden in order to strengthen economic growth. Direct taxes will be reduced considerably in 2001, the reduction will amount to some 0.8 percent of GDP. As a consequence, structural budget deficits will rise. The increases of key interest rates can be justified on the basis of the strategy of the ECB. Since the beginning of EMU, money growth has been higher than intended. Thus, there was a need for correction. Otherwise, the risks for price level stability would have increased even more. The ECB should make sure that it will achieve its target of price level stability because this is essential for its credibility. It is also important for the attractiveness of the monetary union in general. Stability risks in Euroland did, however, not emerge because of a wrong strategy but because the strategy was not followed strictly enough by the ECB. In contrast to the situation in the United States,' there is not yet an acceleration of the increase in productivity in Euroland. However, the "new economy" will also gain ground in the euro area especially since the use of the internet is increasing rapidly. But productivity gains will remain below those observed in the US partly because the share of the computer industry is smaller. In addition, the advance of new technologies is connected with substantial structural changes in the economy. If the gains in productivity are to materialize, product and labor markets must show sufficient flexibility; this, however, is more likely in the US than in Euroland. The current weakness of the euro is usually explained by cyclical factors. Interest rate differentials as well as differences in economic growth play a key role. It can be shown that there is a close relationship between real interest rate differentials and the real exchange rate. Growth differentials do not have much additional explanatory power. On the basis of the model, a gradual appreciation of the euro towards parity vis-a-vis the US dollar is forecast. --

TO PRODUCE OR TO BUY? EXPLORING DETERMINANTS OF LOCAL GOVERNMENT PRIVATIZATION DECISIONS

The U.S. is experiencing the worst recession since the Great Depression. All levels of government have been hit really hard, this is especially apparent at the local level since services provided at the local level are woven into people’s daily life. Thus, how to “do more with less” is more urgent than ever before. The use of privatization came to surface as a sound solution for deficit-plagued governments as it is thought to be more cost effective and outperform the public sector in most cases. This dissertation contains two empirical chapters that examine determinants of privatization and specify the conditions under which it is optimal to buy and under which it is optimal to produce in-house. Chapter two explores determinants that contribute to the use of privatization at the local level in the U.S. This chapter incorporates spatial technique to perform the analysis, which is a different approach from much of the literature. Empirical results indicate that a local government’s sourcing decision is affected by its nearby local jurisdictions. External stakeholders’ involvement contributes to the use of outsourcing, whereas having a limited supply of service providers impedes it. Chapter three applies a transaction cost economics (TCE) framework complemented with a revenue volatility measure to disentangle the mechanisms that drive public services’ outsourcing decisions. Results suggest that, in general, services with higher asset specificity and higher contract management difficulty are less likely to be outsourced, and a robust and competitive market facilitates the use of outsourcing

Mahatma Gandhi and the Prisoner’s Dilemma: Strategic Civil Disobedience and Great Britain’s Great Loss of Empire in India

This paper examines the relationship between statutory monopoly and collective action as a multi-person assurance game culminating in an end to British Empire in India. In a simple theoretical model, it is demonstrated whether or not a collective good enjoys (or is perceived to enjoy) pure jointness of production and why the evolutionary stable strategy of non-violence was supposed to work on the principle that the coordinated reaction of a ethnically differentiated religious crowd to a conflict between two parties (of colonizer and colonized) over confiscatory salt taxation would significantly affect its course. Following Mancur Olson (1965) and Dennis Chong (1991), a model of strategic civil disobedience is created which is used to demonstrate how collective action can be used to produce an all-or-nothing public good to achieve economic and political independence.confiscatory taxation; multi-person assurance game; strategic civil disobedience

Europeanisation: solution or problem?

Is there something new in recent research on Europeanisation? Or should we go back to what we already know about political integration in Europe and avoid the term? This article reviews recent work in four steps: the identification of the specific domain of Europeanisation; the relationship between Europeanisation, on the one hand, and governance, institutions, and discourse, on the other; the methodological problems and the models emerging in this new field of research; and an assessment of the results arising out of theoretical and empirical research. One theme throughout the article is that, in order to develop a progressive agenda, Europeanisation should be seen as a problem, not as a solution. It is neither a new theory, nor an ad-hoc approach. Rather, it is a way of orchestrating existing concepts and to contribute to cumulative research in political science. Europeanisation does not provide any simple fix to theoretical or empirical problems. Quite the opposite, it can deliver if approached as a set of puzzles. A problem in search of explanation – not the explanation itself (Gualini 2003). The conclusion is that Europeanisation has contributed to the emergence of new insights, original explanations, and interesting questions on three important issues: the understanding and analysis of 'impact', how to endogeneise international governance in models of domestic politics, and the relationship between agency and change. These three issues are prominent in the research agendas of international relations, theoretical policy analysis, and comparative politics. To contribute to major issues at the core of political science is a valuable result for a relatively new field of inquiry

How does money influence health?

This study looks at hundreds of theories to consider how income influences health. There is a graded association between money and health – increased income equates to better health. But the reasons are debated.<p></p> Researchers have reviewed theories from 272 wide-ranging papers, most of which examined the complex interactions between people’s income and their health throughout their lives.<p></p> Key points<p></p> This research identifies four main ways money affects people’s wellbeing:<p></p> Material: Money buys goods and services that improve health. The more money families have, the better the goods they can buy.<p></p> Psychosocial: Managing on a low income is stressful. Comparing oneself to others and feeling at the bottom of the social ladder can be distressing, which can lead to biochemical changes in the body, eventually causing ill health.<p></p> Behavioural: For various reasons, people on low incomes are more likely to adopt unhealthy behaviours – smoking and drinking, for example – while those on higher incomes are more able to afford healthier lifestyles.<p></p> Reverse causation (poor health leads to low income): Health may affect income by preventing people from taking paid employment. Childhood health may also affect educational outcomes, limiting job opportunities and potential earnings

Technology, institutions and allocation of time in Swedish households 1920-1990

The modernisation of Swedish households during the twentieth century prompted a considerable productivity growth in household production, which reduced the time input for a fixed volume of routine household work by about 35 per cent 1920-1990. Much of that time was gradually transferred to the labour market, but no evidence can be found for an increase in leisure time. What has been termed a "Cowan paradox" appears in the Swedish data: the output of household services increased significantly with productivity-enhancing technical change. This was, however, the case only in households where small children constituted an impediment to labour market entry. Increased returns to market work induced women who did not face this restriction to allocate more time to the labour market from the mid-1940s. A set of new formal and informal institutions associated with the family eventually redefined the concept of "small children" and so shifted the position of homemaker from being a more or less permanent status of some women to a clearly temporary position of most women.Time allocation; labour supply; household technologies; family policy

In the shadow illegal markets and economic sociology

Illegal markets differ from legal markets in many respects. Although illegal markets have economic significance and are of theoretical importance, they have been largely ignored by economic sociology. In this article we propose a categorization for illegal markets and highlight reasons why certain markets are outlawed. We perform a comprehensive review of the literature to characterize illegal markets along the three coordination problems of value creation, competition, and cooperation. The article concludes by appealing to economic sociology to strengthen research on illegal markets and by suggesting areas for future empirical research. -- Illegale Märkte unterscheiden sich in vielerlei Hinsicht von legalen Märkten. Trotz ihres großen wirtschaftlichen Gewichts und ihrer theoretischen Bedeutung blieben sie in der Wirtschaftssoziologie bislang weitgehend unbeachtet. Dieses Papier schlägt eine Kategorisierung illegaler Märkte vor und diskutiert die Gründe für ihr Verbot. Auf der Grundlage einer umfassenden Literaturauswertung werden die Strukturmerkmale illegaler Märkte anhand der drei Koordinierungsprobleme der Wertbildung, des Wettbewerbs und der Kooperation dargestellt. Das Papier schließt mit Empfehlungen für zukünftige empirische Forschung.