The Positive Economics of Labor Market Rigidities and Investor Protection

This paper presents a positive model which shows that institutional setups on capital and labor markets might be intertwined by politicoeconomic forces. Some countries especially in continental Europe exhibit a corporatist politicoeconomic equilibrium with a substantial protection of insiders on both markets. The more important money is in political decision-making, the more divided the workforce is, and the more globalized capital markets are, the more likely is a capitalist politicoeconomic equilibrium with little employment and substantial investor protection. Our prediction of a negative cross-country relationship between labor market rigidities and of competition on capital markets receives considerable empirical support.Labor markets, employment protection, corporatism, corporate governance, shareholder protection, political economy

The positive economics of corporatism and corporate governance

This paper presents a positive model which shows that institutional setups on capital and labor markets might be intertwined by politicoeconomic forces. Two politicoeconomic equilibria arise from our model, one with little protection of insiders on capital and labor markets, and another one with an institutional bias toward favoring insiders on both markets. Coherent and relatively homogeneous societies, where binding commitments enjoy greater feasability, are more likely to be found in the latter, corporatist equilibrium, whereas fragmented, heterogeneous Anglo-Saxon societies fit better into the former category. These predictions of the model receive considerable support in our crosscountry empirical analysis, thus being potentially important for the current debates concerning the reforms of labor markets and of corporate governance systems. --

Did the Bundesbank Follow a Taylor Rule? An Analysis Based on Real-Time Data

Using a real-time data set for German GDP over the period from 1973 to 1998 we calculate various measures of real-time output gaps and use these to calibrate and estimate Taylor-type reaction functions for the Bundesbank. Most of the reaction functions we find fit the Bundesbank´s actual policy, as represented by the short-run interest rate, quite well. In contrast to previous findings based on ex post revised data for the output gap, we find the reaction coefficients to resemble quite closely those originally proposed by Taylor for some of our real-time measures of the output gap. Broad monetary aggregates such as M3, in contrast, only played a small role for the Bundesbank´s interest rate decisions. Given the good record of the Bundesbank in fighting inflation, the results give support for the use of the Taylor rule for monetary policy.German real-time data; output gap; monetary policy rules

Euroland: Strong upswing, risks to price level stability

The Euroland economy is in a strong upswing. Last year, real GDP increased at a rate roughly equal to that of potential output in spite of the export losses in the wake of the crises in various countries of the world. There have been considerable impulses from monetary policy. Because of the strength of the economy, the ECB has started to tighten its policy. Nevertheless, monetary conditions in the euro area are still favorable. In 2000, real GDP is likely to increase by 3.2 percent; this is the highest rate in the past ten years. After a weak start, the economy gained considerable momentum in the course of 1999. While the strong export performance was responsible for the turnaround, domestic demand growth also accelerated somewhat. In the second half of 1999, real GDP increased at an annual rate of 3.5 percent, and capacity utilization should have reached its normal level by now. Inflation picked up in the course of 1999 with rates between 1.5 and 2.0 percent, thus coming close to the upper limit of the target range tolerated by the ECB. The driving force so far were higher import prices. Since November, the ECB has raised key interest rates by 100 basis points to 3.50 percent. This is the first tightening of monetary policy since the fall of 1997. The expansion of M3, however, indicates that monetary policy continues to be expansionary. Last year, the reference value for money growth was exceeded considerably. The interest rate hikes must be seen against this background. They were the logical consequence in the concept which is based on money growth. In the present situation, rules for monetary policy also suggest a tightening. The McCallum Rule pertains to the growth rate of the money stock M3 that is compatible with the inflation target and the trend changes in output and velocity. Since early 1999, money growth has been higher than the rate implied by the rule. If this tendency continued, inflation would exceed 2 percent. In order to avoid this, interest rates have to go up. Similarly, the Taylor Rule suggests that interest rates need to be higher because capacity utilization is at its normal level and will rise further. The countries in the euro area have come closer to the target of the Stability and Growth Pact as budget deficits have declined. Next year, fiscal policy will be characterized by tax cuts in a number of countries. The strongest impulse will come from the tax reform in Germany. For Euroland as a whole, the stance of fiscal policy will thus become expansionary. In general, there appears to be a shift in the strategy of fiscal policy: While deficits were reduced on the road to EMU also by increases in taxes and contributions, the revenue/GDP ratio will decline in the coming three years according to the plans of governments. Spending is supposed to decline even more so that deficits will shrink. Such a strategy can be highly recommended. According to empirical estimates, fiscal policy has contributed to the decline in the potential growth rate in the past 30 years by expanding the share of government spending in GDP. While leading indicators point to a strong expansion of economic activity in the near future, several factors will lead to a moderate slowdown of the upswing later this year and in 2001. The recovery in the world economy will lose some momentum and the effect of the weaker euro will gradually fade. Furthermore, the ECB will raise interest rates again. An impulse for the upswing, however, will result from the turnaround of fiscal policy. All in all, real GDP growth will amount to 3.2 percent this year and will go down to 2.8 percent in 2001. The unemployment rate will continue to fall; next year, it'will drop to below 9 percent for the first time since 1992. Consumer prices will rise a lot faster than in 1999. Although the inflation rate will decline somewhat in the course of this year because import prices will moderate, the core rate of inflation will go up due to the marked rise in capacity utilization. The Harmonized Index of Consumer Prices will increase by 1.9 percent this year and by 1.8 percent next year. The weakness of the euro has a stimulating effect on output in the euro area which is equivalent to roughly half a percentage point of GDP. If the trade links of the individual EMU countries with the dollar area are taken into account, it can be shown that the effects are spread more or less symmetrically across the economies. --

Higher economic growth through macroeconomic policy coordination? The combination of wage policy and monetary policy

Strengthening potential output is high on the agenda for economic policy in the European Union. While there is widespread agreement that structural policies have a positive impact on long-term growth, there is a controversial discussion whether coordination of macroeconomic policies can contribute to this goal. Against the background of the new economic conditions in the euro area, we analyze what could be gained from a combination of wage policy and monetary policy. Using a small theoretical macroeconomic model, we show that coordination between wage policy and monetary policy can be beneficial under certain assumptions. A policy of sustained wage moderation results in an increase in employment and potential output. Assuming that expectations are not completely forward-looking and prices are sticky, the upward shift in potential output will not be matched by a similar increase in aggregate demand. To prevent an output gap from emerging, the optimal monetary policy is to lower interest rates. However, a central bank aiming at price stability will only do so when the announcement of a policy of sustained wage moderation is credible. Simulations with a large macroeconometric multicountry model confirm that a coordination of German wage policy and ECB monetary policy would help to realize the beneficial effects of wage moderation somewhat faster, although the quantitative effect is relatively small. The long-run gain in employment would accrue regardless of a coordination with monetary policy. According to the simulations, employment in Germany would increase by about 750,000 persons in the long run if wages increase one percentage point slower than usual over a period of five years. Frequently, countries with a particularly positive economic development are said to have benefited from a coordination of macroeconomic policies. However, only a small part of the growth and employment success in these countries can be accounted for such a coordination. In the case of the United States, it is hard to see any evidence of ex ante policy coordination at all. In the Netherlands and in Ireland, a consensual strategy of wage restraint for improving the competitiveness of the economy and stimulating employment has been a significant factor of the economic success. It was important in both cases that significant supply side reforms were implemented by the governments at the same time, whereas monetary policy played no active role. Coordination of macro policies is severely complicated by the pronounced differences in national wage bargaining systems. The systems would have to be harmonized and centralized to create a single European wage policy. It is, however, unlikely that centrally designed harmonization of labor market institutions in the EU can cope with the differences across Euroland regarding productivity and employment. In the framework of the European Union, the presumed positive effects of policy coordination are stressed over and over again, for example in the Broad Economic Policy Guidelines. However, clear definitions and mechanisms how such a coordination can be achieved are missing. The fundamental difficulty concerning a coordination between wage policy and monetary policy arises from two facts: First, there is no such thing as “the” wage policy at the European level. Second, the statute of the ECB does not allow a binding commitment by the central bank. This does not mean, however, that the ECB would not take account of what is happening, for example, to wage developments. According to the monetary policy strategy, it should react if there is an increase in the growth rate of potential output as a result of wage moderation. For example: If the social partners in a large country such as Germany give a credible signal that wage increases will be moderate for several years, the ECB could accommodate this change. However, such a strategy cannot be reversed in that the ECB moves first hoping that wage moderation will follow. --

Evidence of the new economy at the macroeconomic level and implications for monetary policy

The notion of new economy was coined in the United States when there was increasing evidence that, as a result of the introduction of new technologies, the traditional behavior of macroeconomic variables might have changed. The expansion of the 1990s differed from its predecessors in three important respects: productivity, inflation, and cyclical variability. In the United States, labor productivity increased much faster in the 1990s than in the previous decades and, contrary to the usual pattern, accelerated with the duration of the expansion. The view that most of the productivity acceleration was only cyclical and therefore not sustainable over a longer period of time has proven overly pessimistic. Productivity growth has remained on its elevated since the economy peaked. In other large industrial countries, by contrast, productivity growth has continued to decline or has improved only very slightly at best. Differences in productivity trends between the United States and other large industrial countries can be explained partly by the fact that in the United States IT production is more important and IT implementation relatively advanced. In addition, the identification of IT-related productivity gains in Europe is complicated by the general trend towards deregulation in labor and product markets and moderate wage increases that contributed to a rise in labor intensity, which tends to lower advances in productivity. In contrast to productivity developments, the behavior of inflation is consistent with a new economy in all large industrial countries. The moderate inflation can, however, be explained by adequate monetary policies and cyclical influences. Similarly, the analysis of cyclical variability concludes that changes in economic policies are a more important factor in explaining the reduced fluctuations in U.S. GDP than the advent of IT. A technology shock which raises the permanent level of output and, at least temporarily, the growth rate of the production potential has implications for monetary policy. In a world with rational expectations and sticky prices, the optimal reaction of monetary policy to an acceleration of potential output growth is to raise interest rates. The reason is that the expectation of higher incomes in the future causes current spending to grow faster than potential output and thus leads to inflationary pressure. In reality the optimal response of monetary policy to a shift in production potential is difficult to assess given the uncertainty concerning the timing and magnitude of new economy effects on the real economy. Being too expansionary probably has more severe consequences than erring on the other side, because the positive real effects would work through anyway, while inflationary expectations, once triggered, are difficult to reduce. --

Leistungen im Steuerungskontext: Qualitative und quantitative Einflussgrössen auf mathematische und sprachliche Leistungen

Ausgangspunkt ist eine markante Erhöhung der Anzahl Lektionen Mathematik und Deutsch in den Stundentafeln 2015 und 2017 in den Primarschulen (Grundschulen) des Kantons Nidwalden. Um die unmittelbaren Auswirkungen dieser quantitativen Steigerung auf die Fachleistungen zu erkennen, wurden Leistungstest eingesetzt. Es wird den Fragen nachgegangen, wie und in welchem Mass Leistungen durch die Stundentafelerhöhung, durch den Einsatz von Lernstandserhebungen und weiterer Einflussfaktoren zu Stande kommen. Grundlage des Datenmaterials bildeten Lernstandserhebungen der Jahre 2015, 2016 und 2017 an den Primarschulen des Kantons Nidwalden (Schweiz). Im ersten Testjahr (2015) wurden keine mathematischen und sprachlichen Mehrlektionen erteilt. Diese kamen in den Folgejahren zuerst auf der Mittelstufe II (2016) und dann ein Jahr später auch auf der Mittelstufe I und der Unterstufe hinzu. An der Gesamtstudie nahmen über 3200 Lernende der zweiten, vierten und sechsten Klassen teil. Das wissenschaftliche Material aus den Leistungstests besteht aus dichotomen Grunddaten, welche durch ein Einparameter-Modell (1 PL, Rasch-Modell) in Abhängigkeit eines Itemschwierigkeitsparameters verarbeitet wurden. Zur weiteren Auswertung der Leistungsmessdaten wurden sowohl einfache Varianzanalysen mittels t-Test wie auch Mehrebenenregressionanalysen durchgeführt. Für die Modellschätzungen der Stundentafelerhöhung in Bezug zur Leistung wurde auf Grund des komplexen Modellcharakters «nur» die Mehrebenenregression berücksichtigt. Die Daten der Vertiefung Mathematik konnten mittels Interdependenzanalyse untersucht werden. Es bestätigte sich ein Trend, dass mehr Unterrichtszeit an der Primarschule auch zu besseren Leistungen führt. Weiter konnte geklärt werden, dass für Mathematik ein Modell aus den Parametern «Geschlecht», «Migration» und «Mehrstunden» signifikant erscheint. Der Parameter «Mehrstunden» beeinflusst sowohl die mathematische wie auch die sprachliche Leistung mit je rund 2 Prozent. Bei einem geschätzten Term in Mathematik von 510.78 Punkten werden 10.86 Punkte (p<.005) durch Mehrlektionen erklärt. Für den Testbereich Deutsch musste das Modell mit der Stufenzugehörigkeit ergänzt werden. So werden bei einem geschätzten Term in Deutsch von 498.02 Punkten rund 8.29 Punkte (p<.014) durch Mehrlektionen begründet. Die ergänzte Stufen-Verfeinerung zeigt modellhaft auf, dass eine Mehrlektion in der Unterstufe (Test 2. Klasse) einen Mehrwert von rund 36.28 Punkten (p<.000) ergeben. Dies führt zur Erkenntnis, dass Mehrstunden im Fach Deutsch vor allem in unteren Klassen mit grösseren Leistungen einhergehen. Der erhöhte Zeitfaktor ist ein wichtiger Hebel zu besseren Leistungen im Allgemeinen. Der erahnte Leistungsvorsprung der Knaben in Mathematik und der Mädchen in Deutsch konnte trotz Mehrstunden nicht verringert werden. Wohl profitierten beide Gruppen von Mehrstunden, doch zeigte sich keine Differenzverringerung.The starting point is a marked increase in the number of mathematics and German lessons in the 2015 and 2017 semester tables in primary schools in the canton of Nidwalden. Performance tests were used to identify the immediate effects of this quantitative increase on the professional services. It examines the questions of how and to what extent benefits can be achieved by increasing the hourly table hour, by using learning surveys and other influencing factors. The data were based on the results of the surveys conducted in 2015, 2016 and 2017 at the primary schools in the canton of Nidwalden (Switzerland). In the first year of implementation (2015), no mathematical and linguistic lessons were awarded. These were added in the following years, first at the intermediate level II (2016) and then a year later at the intermediate level I and the lower level. The overall study involved more than 3,200 second-, fourth- and sixth-grade students. The scientific material from the performance tests consists of dichotomous basic data, which were processed by a one-parameter model (1 PL, Rasch model) depending on an item difficulty parameter. For the further evaluation of the performance measurement data, simple variance analyzes were carried out by t-test as well as multi-level regression analyzes. For the model estimates of the hourly increase in performance, only the multi-level regression was considered due to the complex nature of the model. The data of the deepening mathematics could be examined by means of interdependence analysis. A trend has been confirmed that more instruction time at primary school also leads to better performance. Furthermore, it could be clarified that for mathematics a model of the parameters "gender", "migration" and "overtime" seems significant. The parameter "multi-hours" influences both mathematical and linguistic performance by about two percent each. For an estimated mathematical term of 510.78 points, 10.86 points (p <.005) are explained by multiple lessons. For the test area German, the model had to be supplemented with the grade affiliation. Thus, with an estimated term in German of 498.02 points around 8.29 points (p <.014) are justified by multiple lessons. The supplemented step refinement shows in a model that a multiple lesson in the lower level (test 2nd class) results in an added value of around 36.28 points (p <.000). This leads to the realization that additional hours in the subject of German are accompanied by greater achievements, especially in the lower classes. The increased time factor is an important lever to better performance in general. The anticipated performance advantage of boys in mathematics and girls in German could not be reduced despite more hours. Although both groups benefited from additional hours, there was no reduction in the difference