Volume 11, Issue 3

In this paper, I show that labour-saving or capital-saving technical progress is induced by the distribution of income between capital and labour. In the long run, technical progress is Harrod neutral. The long-run equilibrium factor income distribution is determined by a parameter of the technical progress function.

Income redistribution in Germany is the result of a combination of several redistribution instruments: there is a complex income tax law, different obligatory social insurances and supplementary benefits. This paper estimates income redistribution by quantile regression, using German EVS data. Two results are obtained: income after redistribution does not always increase in line with income before redistribution, i.e. for people with a low income before redistribution, it does not make sense to increase their efforts, since more work means less earnings. Further, an increasing redistribution rate for higher incomes is not always observable from the data.

In this paper, we empirically derive the welfare function that guarantees that the current German tax and transfer system for single women is optimal. In particular, we compare the welfare function conditional on the presence and age of children and assess how recent reforms of in-kind childcare transfers affect the welfare function. Our analysis is based on a discrete model of optimal taxation.We apply this framework using microsimulation and microeconometric techniques. In general, we find that marginal welfare weights are relatively high for non-working single women. Further, we show that the reform of in-kind childcare transfers is only optimal if society increases the marginal welfare weights for the working single women.

Several studies have emphasized a slow price adjustment to reported insider trades for Germany. The results presented in this paper, though, show that this is mainly caused by a subset of high arbitrage risk stocks. In fact, the abnormal return difference between the quintiles of stocks with highest and lowest idiosyncratic risk is in the range of 2.99-4.90% over a 20-day interval. These results are robust even in the context of a joint generalized least squares approach. By developing a simple zero-investment arbitrage trading strategy mimicking insider trades, it turns out that such a trading strategy, in most cases, generates significant positive returns as long as transaction costs are neglected. However, the out-performance disappears in all risk quintiles, if bid/ask spreads are taken into account.We conclude that the market’s under-reaction to reported insider trades can mainly be explained by the cost of risky arbitrage and is therefore not exploitable.

This paper analyzes empirically the distribution of unemployment durations in West Germany during the 1980s and 1990s. It therefore covers periods before and after the changes during the mid-1980s in the maximum entitlement periods for unemployment benefits for older unemployed. The analysis is based on the IAB employment subsample containing administrative data for about 500,000 individuals. Since these data only partly reveal the unemployment duration in an economic sense, we use a narrow and a wide proxy for unemployment. Our empirical analysis finds significant changes in the distribution of non-employment durations for older unemployed. At the same time, the distribution of unemployment durations between jobs remained unchanged after the reforms. Our findings clearly show that many firms and workers used the more beneficial laws as a part of early retirement packages. Surprisingly, for those workers who found and accepted a new job, we do not observe a prolongation of their search periods to a sizeable extent.

Controllability of longer-term interest rates requires that the persistence of their deviations from the central bank’s policy rate (i.e. the policy spreads) remains sufficiently low. This paper applies fractional integration techniques to assess the persistence of policy spreads of euro area money market rates along the yield curve. Independently from anticipated policy rate changes, there is strong evidence for all maturities that policy spreads exhibit long memory. We show that recent changes in the operational framework and the communication strategy of the European Central Bank (ECB) have significantly decreased the persistence of euro area policy spreads and, thus, have enhanced the ECB’s influence on longer-term money market rates.

This paper deals with the determinants of agents’ acquisition of information. Our econometric evidence shows that the general index of Italian share-prices and the series of Italy’s financial newspaper sales are cointegrated, and the former series Granger-causes the latter, thereby giving support to the cognitive dissonance hypothesis: (non-professional) agents tend to buy the newspaper when share prices are high and not to buy it when share prices are low. Instead, we do not find support for the hypothesis that the agents acquire information in order to trade in the stock market: we find no relationship between quantities exchanged in the market and newspaper sales, nor between stock market volatility and newspaper sales.

Is Benford’s law a good instrument to detect fraud in reports of statistical and scientific data? For a valid test, the probability of ‘false positives’ and ‘false negatives’ has to be low. However, it is very doubtful whether the Benford distribution is an appropriate tool to discriminate between manipulated and non-manipulated estimates. Further research should focus more on the validity of the test and test results should be interpreted more carefully.