Europe’s Revolving Doors: Import Competition and Endogenous Firm Entry InstitutionS

The close relationship between politics and enterprises made the revolving door wide open and reinforced business influence on political decisions. This paper analyses the relationship between firm entry institutions and import competition inside the EU. Though there is a clear tendency for entry and startup costs to decrease over time and particularly in space, I challenge the view that greater openness to trade automatically leads to improved firm entry institutions. My model enables calculating business entry impediments whereas the lobbying game produces structural estimates of the counterfactual levels of trade, prices and earnings had no business obstacles existed. Conditions for active entry barriers are laid down in terms of trade margins, asymmetries in technology and trade costs. Importantly, the model demonstrates that startling differences in firm regulation can be explained resorting to relative gains and losses accruing in a fully trading network as is the EU. More generally, understanding factors which affect imports is crucial for any model seeking to uncover ex ante welfare effects of trade

Global Perspective on Structural Labour Market Reforms in Europe

Recent turbulent times have once again demonstrated how important flexible product and labour markets are to dampen the effects of adverse economic shocks. A number of labour market reforms have been implemented to enhance economic resilience and flexibility. However, accounting for the efficacy of policy interventions requires going beyond national boundaries and evaluating international interactions and global interdependencies, which may strengthen or weaken economic responses. Concentrating on open European economies, this paper deals with labour market institutions and structural reforms in a general equilibrium framework, which allows to analyse the intricate connections between labour policy choices and international trade (openness), paying special attention to labour market policy shocks. Amid discussions about a fiscal union in Europe, we empirically demonstrate that labour market policies can have positive and negative spillovers to trading partners, thereby calling for coordinated policies within a trading bloc. We answer three types of questions: what would have happened had all economies implemented structural labour market reforms simultaneously? How heterogeneous are responses in a single economy to shocks conducted in every other country? Relatedly, how heterogeneous are responses by all economies to a reform in one given economy

Spatial Nexus in Crime and unemployment in Times of crisis: Evidence from Germany

Space is important. The recent global financial crisis has vividly pointed to spatial patterns in economies’ reactions to the global economic shocks. This paper focuses on labor market responses and its interactions with criminal activities in a causal and spatial framework. we study the case of Germany as evidently this country’s economy has demonstrated resilience during the whirl of economic crisis. Our contribution is twofold: first, we lay down a parsimonious labor market model with search frictions, criminal opportunities, and, unlike earlier analyzes, productivity shocks which are important in explaining empirical regularity of criminal engagement. Second, we seek empirical support using data on the 402 German districts for 2009-2010, the years following the global financial crisis, in a setting that allows not only crime spatial multipliers but also inherent endogeneity of unemployment. Adverse income shocks clearly unfold a spatial nexus between unemployment and crime rates. More specifical ly, we find that youth unemployment plays a prominent role in explaining property crime, namely housing burglary. Our results are in line with previous research: neglecting endogeneity of unemployment understates its impact and employing the youth unemployment share instead of rate points to distinctive effects. The analysis offers important implications for countries that are currently undergoing fiscal consolidation and are experiencing high unemployment rates

Fiscal Policy and Trade Margins: An Educational Channel

This paper combines current literature on the heterogeneous firms in international trade with the public economics of fiscal policy. We study the nexus between the intensive and extensive margins of trade, and their relationship with fiscal policy. When taxes are collected through the fixed per-period production payments, borne by all active firms, they impact firm partitioning and exporting decisions, but are nevertheless left unmodelled and treated as a pure loss in the literature. Instead, we show theoretically how such taxes can be channelled back into an open economy through spending on education (thereby affecting workers’ skill distribution), and contrast the result with the standard trade liberalisation exercise and a wasteful channel, which are prevalent in the literature. We estimate the model’s predictions using a novel data set covering 40 countries from 1995 to 2011. Employing the instrumental-variable panel techniques, we find support to our main testable predictions: fixed production taxes, used as the source to fund education, create an educational channel on the aggregate expenditure and the extensive margin of trade. A decrease in expenditure and an increase in the extensive margin are both amplified once an educational channel is allowed for

US monetary policy uncertainty drives global business cycles

Though the reactions of economic activities in the US and globally to FED policy are well documented, the global impacts of unexpected changes in the US monetary policy uncertainty are still less understood. Povilas Lastauskas and Anh D. M. Nguyen highlight the role of uncertainty in generating synchronised worldwide contraction and rationalising the global economy’s slow recovery from global financial crisis. Despite [...

Strategies for Deeper Integration: Case Study of the Baltics

When we talk about international integration, trade and investment, the it’s-all-about-geographic-proximity is a tempting argument to make. While the importance of geographic closeness cannot be denied, empirical evidence suggests existence of other, perhaps equally significant factors that bring countries closer together. The aim of this paper is to sketch some light on an often overlooked aspect of international integration, recently introduced as the ‘new regionalism’ paradigm. Based on the proposed ‘mentoring’ and ‘the training ground’ concepts we analyze such integration within the Baltic Sea region, suggesting an alternative approach to international economic convergence

Strategies for Deeper Integration: Case Study of the Baltics

When we talk about international integration, trade and investment, the it’s-all-about-geographic-proximity is a tempting argument to make. While the importance of geographic closeness cannot be denied, empirical evidence suggests existence of other, perhaps equally significant factors that bring countries closer together. The aim of this paper is to sketch some light on an often overlooked aspect of international integration, recently introduced as the ‘new regionalism’ paradigm. Based on the proposed ‘mentoring’ and ‘the training ground’ concepts we analyze such integration within the Baltic Sea region, suggesting an alternative approach to international economic convergence

Insurance market in the EU countries and Lithuania : analysis and perspectives

Insurance is a very dynamic area, and to design it is a complicated task. This confusion arises because of insurance goals and impact variety and inconsistence. Independent insurance intermediators play an important role in the insurance sector. Their functioning, by the way, is very dynamic, constantly falling down, and increasingly approaching the role of service provider for customers and assurers. The choice of services is growing, already now agents and brokers render qualified consultations on the questions of management and designing, coordinate the interests of insurer and assurer, deal with insurer's matters, and suggest new insurance products. This forces the market to become more competitive, stable, reliable and dynamic. Not always there is success in coordinating interests of assurers, their intermediators and insurers. There arises more ambiguity while evaluating the influence of insurance on the economy of the country and the welfare of each inhabitant. Despite this discrepancy, the majority of people agree that the existence of insurance gives liveliness for the economy and encourages investments, gives a sense of safety and activates business. Insurance perspectives in the EU and Lithuania were reviewed, features of the present day insurance which has formed during the last years or is still forming are discussed in the article. The EU case: The structure of the current insurance market is determined by the dominating purchase and mergers during the last decade.There is a belief that assurers will increasingly specialize. In such a way, there will be looked for the opportunities to occupy the market share of a specific insurance branch, to pursue valuable information to ensure a competitive advantage. Private sector will become increasingly responsible for rising pensions, because the ageing of society causes more and more problems to the national insurance. From the macroeconomics point of view, it will encourage permanent saving, may depress inflation because of a reduced current consumption. New assurers, intermediators and insurance products force to develop a new sales network, thus in the nearest future we will see the methods of combined sales, a wider usage of information technologies which enable to evaluate every individual risk and provide an advantage of convenience for the customer. The case of Lithuania: The Lithuanian insurance market has bigger opportunities of expansion, confirmed by low indexes of insurance development. Besides that, it is believed that the existing environment is very favourable for the growth – there occurs social insurance transition to the private sector, foreign capital enterprises bring good experience, raise claims of quality, there is an integration between insurance enterprises and banks. Life insurance will expand more in comparison with non-life insurance. The development levels of these insurance types and performed reforms, the rise of income disposed by individuals and thus better opportunities for the future testify to this. […

Expansion of insurance business: theoretical aspects and assumptions of market development

The nowadays insurance, although still having its own essential purpose, has a lot of differences in comparison with the predecessors, which have been mostly determined by the change in technologies, insurer`s demands and assurer`s opportunities. Purposes of this article is to review and highlight such problems, typical of the insurance market, as asymmetric information, adverse selection, conditional commissions, development level of insurance market, the main measures, defining the state of insurance, significance of intermediators in the process of selling. One of the ways of problems solution is versions of insurance products, when there may be reached at least partial resolution of risk, by suggesting fewer compensations or incomplete repayments. Conditional commissions for independent intermediators may facilitate the entrance of new assurers into the market, because they create favourable impacts of incentive, which help to overcome unwillingness to collaborate with a new market participant because of non-existing work relationship. Moreover, the system of compensation, motivated both by a bonus and profitability, based on commissions, induce to transmit reliable information for an insurer about customers, otherwise it would have a negative impact on conditional commissions. Solvency II will have impact not only on assurers, but, on the whole economy of the country. One of the expected results is the increase of an insurer’s protection and improvement at understanding of insurance services. This would reduce problems of asymmetric information, because an insurer would not only dispose of the bigger information amount, but would also be more induced to reveal information for insurers, which is essential in order to offer an appropriate insurance policy, after a better perception of insurance particularity. Tasks of the research – to establish features of insurance market of the current period; to provide prognosis of its development; to anticipate application opportunities of a theoretical research model. There will also be an attempt to discuss not only specific, but also other phenomena, typical of other markets, such as competition or concentration. Methods of the research: after foreign scientific literature has been analysed, there are provided theoretical aspects of insurance market development and a represented-representative theory model in insurance, on the basis of which the research has been done and the current situation of insurance market has been evaluated. Article in Lithuanian. Draudimo verslo plėtra: teoriniai aspektai ir rinkos plėtros prielaidos Santrauka. Šiandienis  draudimas,  nors  ir  išlaikęs  savo  esminę  paskirtį,  turi  nemažai  skirtumų,  palyginti  su  pirmtaku, kuriuos daugiausia lėmė technologijų kaita, draudėjų poreikiai ir draudikų galimybės. Šio straipsnio tikslai– apžvelgti ir  išryškinti  tokios draudimo  rinkai  būdingos  problemos,  kaip  asimetrinė  informacija1,  nepalanki  atranka2,  sąlyginiai komisiniai, draudimo rinkos išsivystymo lygis, tendencijos, pagrindiniai matai, nusakantys draudimo padėtį, tarpininkų reikšmė pardavimo procese. Vienas iš problemų sprendimo būdų – draudimo produktų variantai, kai gali būti pasiektas bent dalinis rizikos skaidymas, pasiūlant mažesnes kompensacijas arba nepilnus padengimus. Sąlyginiai komisiniai ne-priklausomiems tarpininkams gali palengvinti naujų draudikų įėjimą į rinką, nes sukuria palankius paskatos poveikius, padedančius įveikti nenorą bendradarbiauti su nauju rinkos dalyviu dėl nesančių darbinių ryšių. Be to, kompensavimo sistema, pagrįsta ir premija, ir pelningumu remtais komisiniais, skatina perduoti patikimą informaciją draudikui apie klientus, antraip neigiamai paveiktų sąlyginius komisinius. Mokumas ii turės poveikį ne tik draudikams, bet per juos ir visam šalies ūkiui. Vienas iš lauktinų rezultatų yra draudėjų apsaugos padidėjimas ir draudimo paslaugų suvokimo pagerėjimas. Tai mažintų asimetrinės informacijos problemas, nes draudėjas, geriau suvokęs draudimo specifiką, ne tik disponuotų didesniu informacijos kiekiu, bet turėtų daugiau paskatų atskleisti informaciją draudikams, kuri būtina tinkamam draudimo polisui pasiūlyti. Tyrimo uždaviniai – nustatyti dabartinio laikotarpio draudimo rinkos bruožus; pateikti jos raidos prognozę; numatyti teorinio tyrimo modelio taikymo galimybes. Taip pat bus stengtasi aptarti ne tik specifinius, bet ir kitoms rinkos būdingus reiškinius – konkurenciją ar koncentraciją. Tyrimo metodai: išanalizavus mokslinę užsienio literatūrą, pateikiami teoriniai draudimo rinkos vystymosi aspektai ir atstovaujamojo-atstovo teorijos draudime modelis, kuriuo remiantis ir buvo atliktas tyrimas bei įvertinta esama draudimo rinkos situacija. Reikšminiai žodžiai: draudimas, draudėjas, draudikas, draudimo tarpininkai, draudimo įmoka, draudimo rinka, sąlyginiai komisiniai. First published online: 16 Jun 200