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Institut für Weltwirtschaft The Kiel Institute for World Economics

Annual Report 2003

Contents

I. The Institute in 2003: An Overview 3 II. Research and Advisory Activities 6 1. Main Areas of Research 6 2. President’s Department 7 3. Growth, Structural Change, and the International Division of Labor (Research Department I) 10 4. Environmental and Resource Economics (Research Department II) 21 5. Regional Economics (Research Department III) 27 6. Development Economics and Global Integration (Research Department IV) 35 7. Business Cycles (Research Department V) 43 8. Interdepartmental Research 53 9. Cooperation with Researchers and Research Organizations 53 10. Advisory Activities and Participation in Organizations 61 11. Commissioned Expert Reports and Research Projects 64 III. Documentation Services 72 1. The Library 72 2. The Economic Archives 75 IV. Teaching and Lecturing 77 1. Universities and Colleges 77 2. Advanced Studies Program 77 3. Guest Lectures and Seminars at Universities 79 V. Conferences 80 1. Conferences Organized by the Institute 80 2. External Conferences 84 VI. Publications 96 1. In-House Publications 96 2. Out-of-House Publications 103 VII. Appendix 114 1. Recipients of the Bernhard Harms Prize, the Bernhard Harms Medal, and the Bernhard Harms Prize for Young Economists 114 2. Staff (as of January 1, 2004) 116 3. Organization Chart 121 I. The Institute in 2003: An Overview

The Kiel Institute for World Economics at the University of Kiel (IfW) is one of the world’s major centers for international economic policy research and documentation. The Institute’s main activities are economic research, economic policy consulting, and the documentation and provision of information about international economic relations. The Institute’s publications and services are addressed to academics in Germany and abroad as well as to decision-makers in both the public and private sector, and to those people in the general public interested in domestic and international economic policy. The Institute’s Library is one of the world’s largest libraries for economics and social sciences, and the Institute’s Economic Archives have a comprehensive collection of newspaper articles. The Institute, founded by Bernhard Harms in 1914 as the Königliches Institut für Seeverkehr und Weltwirtschaft, has its roots in the Staatswissenschaftliches Seminar at the University of Kiel, which was established in 1899. In 1934, the Institute was given its present name, Institut für Weltwirtschaft. Today the Insti- tute is affiliated with the University of Kiel, but is still an independent institution. It is a member of the Wissenschaftsgemeinschaft Gottfried Wilhelm Leibniz (WGL), which unites institutes and service providers that are of supra- regional importance. In the field of academic research, the Institute focuses on applied economic research. The Institute engages especially in the empirical analysis of current economic policy issues, in the identification and theoretical analysis of newly emerging economic phenomena, and in preemptive innovative economic thinking to find new solutions to economic policy problems. In 2003, numerous research projects were initiated, followed up, and completed. The resulting publications were presented at several international and national conferences and were published in various studies and contributions to renowned economic journals. Further, due to improved online access, the services offered by the Library, which also functions as the German National Library of Economics (ZBW) and is also a member of the WGL, and the Economic Archives were increasingly taken advantage of by both domestic and foreign users. Institutions which have a service function for research such as the ZBW are evaluated by the WGL Senate at least every seven years. At the end of November, the Senate adopted the evaluation given by a WGL group which visited the ZBW in May and recommended that the federal government and the state governments 4 The Institute in 2003: An Overview

should continue to support the ZBW. The recommendation is based on the ap- praisal that in recent years the ZBW has developed along positive lines. The Institute attributes great importance to the advanced training of economists. It offers an international postgraduate program and encourages the regular exchange of research results by hosting conferences, workshops, and guest lectures. In 2003, numerous research associates at the Institute were engaged in work on their doctoral dissertations, some on their Habilitation. Jörn Kleinert, Andrea Schertler, and Hubert Strauß, who had been a researcher in the Business Cycles Department until May 2002, were awarded doctorates at the Universität Kiel. Claudia M. Buch was appointed to tenured position at the University of Tübingen. Several economists from the Institute were awarded prizes for their outstanding endeavors. Holger Brauer was awarded the Fakultätspreis der Wirtschafts- und Sozialwissenschaftlichen Fakultät der Universität Kiel for his dissertation “The Real Exchange Rate and Prices of Traded Goods in OECD Countries,” and Jörn Kleinert was awarded the Erich-Schneider-Preis des Instituts für Volkswirtschafts- lehre der Universität Kiel for his dissertation “The Role of Multinational Enter- prises in Globalization.” Herbert Giersch was granted the Wissenschaftspreis of the City of Kiel. Horst Siebert was awarded the Verdienstorden of the Federal Republic of Germany by the German president.

At the end of the year, the Institute had 272 employees, 57.7 percent of which were female and 26.8 percent of which were part-time employees. Of the total, 128 employees worked in the President’s Department, the Information, Editorial, and External Relations Department, and the five research departments. 117 worked in the Library, and 27 in the Administration. Of the 272 employees, 79 were academics and 193 were nonacademics, 4 of which were trainees. Several staffing changes took place in 2003. In April, Horst Siebert, president of the Institute, retired after 14 years at the Institute. His holistic approach to in- vestigating global economic processes and structures, and their driving forces, has shaped the public perception of the Institute and has given depth and breadth to the work conducted at the Institute. His analyses and recommendations have received a great deal of attention, not only at home, but in numerous other countries as well. His textbooks on economics have been translated into numerous languages and have been used to teach students of economics in many countries. Hans-Georg Glaeßer, head of the Asia department of the Library since 1982, also retired. Matthias Lücke, head of the Industrialization and Foreign Trade Research Group, returned to the Institute after having been active for three years in an IMF department which analyzed development in countries of the former Soviet Union. The Institute in 2003: An Overview 5

In May 2003, a new Employee Council of the Institute was elected, the chairman of which is again Wolfgang Weskamp; his deputies are Hermann Dick and Christiane Krieger-Boden. In January 2003, Nora Grabsch was appointed Equal Opportunity for Women representative of the Institute; her deputy in 2003 was Abel Koch-Klose. As of 2004, Jana Daleske will be her new deputy. In September 2003, Bernhard Heitger died unexpectedly at the age of 54. He had been an economist in the Growth, Structural Change, and International Division of Labor Department since 1975, and had published internationally well-read papers about the relationship between growth and public activities.

II. Research and Advisory Activities

1. Main Areas of Research

The Institute’s central area of research is the international division of labor from a static and dynamic point of view. The Institute analyzes the sectoral and spatial allocation of goods, services, and factors of production. In particular, it analyzes the endowments of countries, including their environment, the changes in these endowments over time, and the international interdependencies between monetary and fiscal policies and between business cycles of various countries. In analyzing these phenomena, special emphasis is given to the consideration of institutional settings in national as well as international terms and to the incentive and political economy systems that are part of these settings. Research in 2003 concentrated on the following topics: Z worldwide locational competition and the effects of globalization on national goods and factor markets, Z global regulatory systems and their reforms, Z trends, causes, and consequences of the “new economy,” Z the integration of developing countries, newly industrializing countries, and transformation countries into the international division of labor and the multilateral trade order, Z the effects of economic reforms in developing countries on the distribution of income, Z the effects of international environmental and climate policies, Z the analysis of currency and financial markets and international capital flows, Z European integration, with special emphasis on its eastern enlargement and the monetary policy of the European Central Bank, Z international variation in educational performance and its determinants, Z reforms of labor markets and social security systems in industrialized countries, especially in Germany, Z national and international business cycle analysis and forecasting, Z structural adjustment problems in eastern Germany, Z fiscal policy and subsidies in Germany, Z regional growth and spatial structures, Z the efficient provision of network infrastructure in transportation and telecommunications. President’s Department 7

As many of these topics were closely related to one another, the Institute’s research departments worked together on several research projects. The Institute is assisted by its Scientific Advisory Council in choosing its future research projects. The Advisory Council promotes the integration of the Institute into research networks and promotes collaboration with leading economists. Its members are proposed by the president and appointed for a period of three years by the Schleswig-Holstein Minister of Education, Science and Research, and Culture. In 2003 the members were: Prof. Dr. Axel Börsch-Supan, professor at the Macroeconomics and Economic Policy Department at Mannheim University, Prof. Sebastian Edwards, Ph.D., Henry Ford II Professor at the University of California at Los Angeles, Prof. Martin Feldstein, Ph.D., George F. Baker Professor at Harvard University and president of the National Bureau of Economic Research, Cambridge, Mass., Prof. Dr. Gerd Hansen, former professor and chair of the Institute for Statistics and Econometrics at the University of Kiel, Prof. Dr. Dr. h.c. Helmut Hesse, former president of the Landeszentralbank in Bremen, Lower Saxony, and Saxony-Anhalt, Prof. Dr. Dr. h.c. mult. Otmar Issing, member of the Directorate of the European Central Bank, Prof. Anne O. Krueger, Ph.D., Herald L. and Carolin L. Ritch Professor at Stanford University and First Deputy Managing Director of the International Monetary Fund, Prof. André Sapir, Ph.D., professor at the Université Libre de Bruxelles and member of the Group of Policy Advisers of the European Commission, Prof. Guido Tabellini, Ph.D., professor at Luigi Bocconi University, Milan.

2. President’s Department

The President’s Department focused its research in 2003 on the “new economy” and banking regulation. The Financial Markets Research Area, though affiliated with the President’s Department, is an independent research group. Research on the new economy was carried out by continuing the project on the effects of open source software on competition. The starting point of the project was the observation that, in many sections of the software markets, off-the-shelf 8 Research and Advisory Activities

software has reached a monopolistic status, whereas other, high-quality, partly noncommercial, and freely available alternatives have only very low market shares. The project focused mainly on the issue of the impact of having just a few software vendors dominating the market, and whether an increased use of open source software would lead to more competition, thus strengthening the position of Germany in information and communication technology in general. In a first step, a theoretical framework was developed which explained the empirical picture of software markets. Additionally, work was begun on determining and systematizing the factors that impede or facilitate the diffusion of open source software, i.e., the supply-side and demand-side factors that affect these markets. It is the aim of the project to derive economic policy recommendations that would facilitate a nondiscriminating, fair use of open source software in the public and the private sector, and increase its benefits. A project in the field of banking regulation, which analyzed the effects of minimum capital requirements on risk taking and the capital structure of banks, was also continued. According to the buffer theory, banks hold capital in excess of minimum capital requirements. This buffer insures banks against negative capital shocks and, thus, a potential breach of the regulation which would lead to costly interventions by supervisors. As current minimum capital requirements are risk-based, banks can also comply with regulations by lowering portfolio risk. In line with the buffer theory, empirical studies show that U.S. banks which approach the minimum capital requirements raise capital and lower risk simultaneously. In contrast, U.K. and Swiss banks raise capital, but do not adjust risk. In cooperation with the Deutsche Bundesbank, the respective behavior of German savings banks was analyzed. Like U.S. banks, German savings banks seem to raise capital and lower risk simultaneously in order to build up an appropriate capital buffer. Once they have built up the optimal capital buffer, they try to hold it constant by raising (lowering) capital if risk increases (decreases). The respective data for this empirical study were provided by the Deutsche Bundesbank.

B Financial Markets Research Area

The Financial Markets Research Area (headed by Claudia Buch) deals with the globalization of financial markets, which has become one key manifestation of the increasing integration of national markets. Many legal restrictions on cross- border capital movements have been abolished, in particular in developed countries, and technological progress has lowered information and communication costs considerably. As a result, global capital flows and the scale of international financial markets have grown rapidly during the past decades. The Research Area analyzes the implications of the globalization of financial markets from different angles. Evidence on the international activities of banks is used to President’s Department 9

gauge the determinants and patterns of financial integration. The effects of financial integration are then studied both from a macroeconomic and from a microeconomic perspective. On a macroeconomic level, the link between openness, the effects of macroeconomic policies, and the volatility of the real economy are studied. On a microeconomic level, changes in the financing patterns of firms in integrated markets are analyzed. The aim of one of the macroeconomic research projects of the Research Area has been to analyze the link between the globalization of financial markets and business cycle volatility. It has been shown empirically that no simple one-to-one link between business cycle volatility and financial market integration exists. Rather, the empirical results of the project suggest that this link depends upon the nature of the shocks that hit an economy. Moreover, the empirical results of the project indicate that the link between business cycle volatility and financial market integration has not been stable over time. Also, cross-country heterogeneity is substantial, implying that the potential impact of financial market integration on business cycle volatility depends upon a number of crucial country- specific factors. The Research Area plans to analyze these factors in more detail. In these analyses, special attention will be paid to the role played by the development of the financial sector of an economy for the way financial market integration affects business cycle volatility. The aim of another project of the Research Area has been to study the implications of the process of global financial market integration for the propagation of monetary policy shocks. A main result of this research project is that the structure of households’ preferences and the structure of the goods market play a key role for the way a monetary policy shock propagates through an open economy in a regime of high international financial market integration. Moreover, the Research Area studied how financial market integration and financial market frictions could interact in shaping the response of important macroeconomic variables like output, inflation, and investment to a monetary policy shock. Last but not least, it was shown that the interplay between monetary and fiscal policy is of key importance for the impact of financial market integration on the propagation of macroeconomic policies in open economies. While the study has so far focused mainly on the impact of financial market integration on the amplitude of cyclical economic fluctuations, the Research Area plans to widen the scope of the analysis by studying the role of financial market integration for longer-term economic adjustment processes, using models with capital accumulation. Another research project, which combines elements of micro- and macroeconomic economics, aims at analyzing the linkages between the integration of international financial markets and the international propagation of shocks. To 10 Research and Advisory Activities

this end, the Research Area plans to study the developments in and links between the European stock markets for fast-growing firms. The focus is on the stock markets for fast-growing firms because policy-makers often articulate hopes that the development of these markets helps foster economic growth and welfare by contributing to the accumulation and diffusion of human capital and technological innovation. It is, therefore, of key importance to study the efficiency of and dynamic links between these markets. Hence, in a first step, the Research Area will analyze the efficiency of the European stock markets for fast-growing firms. Specifically, it will analyze whether the stock market returns in these markets are autocorrelated and, thus, predictable. Autocorrelation of returns could indicate that investors could make excess trading profits, which, in turn, would be an indicator of possible market inefficiency. In a second step, the Research Area will analyze the dynamic linkages between European stock markets for fast-growing firms. To this end, it will analyze how information is processed in these markets and how information is transmitted across markets. These analyses will help deepen our understanding of the international transmission and propagation of shocks and will, thereby, provide further important insights into the efficiency of the European stock markets for fast-growing firms. With regard to the projects that have a stronger microeconomic focus, research continued to focus on developments in the banking sector. Using detailed firm- level data sets for German banks, the Research Area analyzed parallels between the foreign activities of banks and of nonbanks. Studies on the determinants of foreign activities of banks suggest that there are important parallels between these activities and that foreign investments of banks are shaped by factors similar to those that shape the foreign activities of nonbanks. A topic which is of particular interest in this context is the links between the foreign direct investments of banks and nonbanks. In addition, the Research Area analyzed whether banks prefer countries in which other German banks are already present as destinations for their foreign investments.

3. Growth, Structural Change, and the International Division of Labor (Research Department I)

The research agenda of the Growth, Structural Change, and International Division of Labor Department (headed by Henning Klodt) focuses on the integration of the world economy and related structural adjustments in highly developed, internationally open economies. The globalization of the world economy, technological progress, and changes in institutions are analyzed as the major determinants of economic development. In particular, international factor flows Growth, Structural Change, and the International Division of Labor 11

and their impact upon growth and employment, labor market regimes, and the design of social security systems are analyzed. Special emphasis is given to the development of European integration. Important research fields in 2003 were the impact of international trade on the German labor market, the prospects for economic integration in an enlarged European Union, the relationship between foreign direct investment and migration, and the economic determinants of immigration to Germany. Further analyses investigated the determinants of long-term unemployment in Germany, the prospects for reforming the German unemployment insurance system, and the development of European venture capital markets. All the analyses conducted by the Department dealt with long-term economic developments and their economic policy implications.

B Structural Change and Growth

The Structural Change and Growth Group (headed by Henning Klodt) finished an analysis of the long-term determinants of economic growth from an international perspective. For a group of about 100 countries and the period 1975 to 1995, it was shown that property rights arrangements significantly influence economic growth. The analysis explicitly took into consideration the mutual de- pendence between the quality of property rights and the strength of economic growth. The Group continued its project on the internationalization of the German economy. This project is a joint project with the Financial Markets Research Area and the University of Kiel. The work is based on a micro-level data set which has been recently made available by the Deutsche Bundesbank. Because of the size and the scope of this data source, which contains about 100 characteristics of up to 20,000 affiliates of German multinational firms in about 200 countries for the period 1989–2001, it was first necessary to become familiar with the data. The Group chose a combination of descriptive statistics and econometric regressions on various levels of aggregation to achieve this goal. First results point to a large heterogeneity of the data set, not only between but also within industries. Contrary to the assumption often made in the literature, the “representative” firm therefore does not seem to exist. The restrictions which are implied for models and data by this assumption seem to be substantial. In the next step, the Group will search for sources of this large heterogeneity. A second area of research using this excellent data set concerned the effect of distance on economic activities of firms. The aim of this research was not only to trace the effect of distance during the course of globalization, but also to 12 Research and Advisory Activities

determine the causes of this effect. Physical distance is certainly very important, but cultural, historical, and political ties play an important role too. These factors affect the emergence of networks between actors from different countries. This becomes very obvious when studying border regions. These show a systematical- ly higher level of transactions with the adjacent country than was predicted by a linear regression model. A positive effect of the border was also found for migration. Interestingly, this effect could only be found by analyzing migration to and from Germany at the state level but not when analyzing it at the country level. For instance, there is much more emigration from Schleswig-Holstein to Denmark than from other states and much more from Bavaria to Austria than from other states. The Group also continued its competition-policy-oriented analysis of telecommunications regulation. This analysis was motivated by the modification of the German telecommunications law, which was required by several new EU regulations on the subject. The analysis focused on the question whether termination fees in mobile communications should be regulated ex ante. This topic is hotly debated not only at the policy level, but also in the modern industrial economics literature on the regulation of network industries. Based on this literature and on the assessment of actual competition it was shown that such a regulation would hamper rather than foster competition in the German mobile communications market.

B International Economics and Structural Change

The International Economics and Structural Change Group (headed by Jürgen Stehn) continued a research project that analyzes structural adjustments stemming from intraindustry trade. According to traditional theories of intraindustry trade, structural adjustment pressures resulting from intraindustry trade are relatively weak. Since intraindustry trade, by definition, comprises trade with goods produced with similar factor intensities, factor incomes and employment structures are not affected by intraindustry trade. However, it can be assumed that an upsurge in intraindustry trade does lead to changes in factor incomes and factor structures if a large part of reciprocal trade in single product groups is based on an exchange of goods characterized by different quality levels and if the home country specializes in the production of high-quality products. The Group conducted an empirical analysis of Germany’s intraindustry trade with its major trading partners which supported this assumption. Moreover, Germany has specialized in the production of high-quality products on a large scale. This research will be widened and deepened in the coming year. Growth, Structural Change, and the International Division of Labor 13

In cooperation with the Social Security and Growth Group, the Group finished a project that examined the relationship between the upsurge in interindustry trade and the growing unemployment rate among less-skilled workers in Germany. In Heckscher–Ohlin trade theory, interindustry trade and wages (or employment, in the case of sticky wages) are linked solely through changes in product prices (Stolper–Samuelson theorem). Thus the Group used the long-term shift in prices for human-capital-intensive and labor-intensive goods as a measure of the employment effects of interindustry trade. The Group’s empirical findings showed that—as far as observable changes in relative product prices are concerned—the effects of interindustry trade on the German labor market seem to be rather small. However, additional empirical tests revealed that EU tariff and nontariff trade barriers could be responsible for the trend in relative product prices and thus give rise to an underestimation of the effects of trade on the labor market. In addition, two further reasons for the high and rising unemployment of low- skilled employees in Germany were examined: (i) a skill-biased technical change and (ii) labor market adjustment failure. The empirical analyses indicate that an exogenous wage-setting process and a bundle of factors, including a skill-biased technical and structural change, have contributed to the decline in relative demand for low-skilled employees in Germany. Thus, economic policy in Germany should focus on improving the employability of workers in the lower segment of the labor market and on raising the adjustment flexibility, above all the flexibility of the wage structure, of the German labor market. As part of the research on the determinants of trade integration, an analysis of the Baltic States’—Estonia’s, Latvia’s, and Lithuania’s—efforts to integrate into the European and international division of labor was completed in cooperation with the Transportation Economics Group. The analysis of Baltic regional export and import performance revealed that the Baltic States’ integration into the Western European division of labor progressed significantly during the 1990s. Gravity model estimates suggest that Baltic imports and exports are in general receptive to the appeal of market size and incomes of trading partners, and decrease with growing distances. However, it is of major interest that the process of EU accession was not reflected across the board in the Group’s regressions on the export side. Instead, regional determinants clearly dominated the results for Estonia and Latvia despite the expectation that the trade agreements with the EU would have fostered Baltic-EU trade flows as a whole. Apparently, trade with the non-Baltic Rim members of the EU was much less intense than with Baltic Rim members even after controlling for market size and distance. Therefore, a significant share of Baltic exports is absorbed in the Baltic Sea Region as a regional center of gravity, while on the import side, all three Baltic States are already integrated into the entire EU and into world markets to a larger degree. Accordingly, 14 Research and Advisory Activities

the Baltic States’ trade integration into the EU is an integration via their Baltic Rim neighbors, with the Baltic Sea as a major integrating device for Estonia and Latvia, but less so for Lithuania. Moreover, traces of the Soviet division of labor are still visible in Baltic trade patterns, in particular on the Baltic import side, for Lithuania even on its export side. But the recent reorientation of Baltic trade relations also bears a similarity to the period soon after World War I when the Baltic States had become independent from Russia and started integrating towards Western Europe. In this respect, EU integration appears to be a reintegration into regional markets to which a historical affinity exists. Based on this pilot study and against the background of the forthcoming EU accession of ten applicant countries, a research project on regional centers of trade integration in an enlarged EU was initiated. Although the enlargement process generates a European internal market of a new dimension, such a far- reaching economic integration does not necessarily result in a homogeneous economic space. It appears to be rather realistic that economic differences will remain and that a heterogeneous network of trade relations differing by intensity will develop. Therefore, the research project intends to identify the determinants of trade integration and to determine the regional centers of gravity in an enlarged EU. Determinants relevant for the realignment of the European division of labor are the EU’s institutional framework, locational characteristics, the economic profile of old and new EU member states, and the integration of member states in traditional markets or language areas which may have caused path dependencies in the development of trade relations. These determinants of economic integration mirror various forms of distance: among them are not only real geographical distances measured either by space or time, but also “virtual distances” as exerted by tariff or nontariff trade barriers, different languages, and diversities in business cultures, traditions, or economic systems. In general, increasing distance means that the intensity of economic interaction between two countries decreases. As an integral part of the research project, the Group intends to apply a gravity model that explicitly takes real and virtual distances into account to determine the gravitational forces influencing the formation of regional trade patterns in an enlarged EU. In addition, the gravity model will be used to conduct simulations of the future European division of labor and to examine the FDI activities of the applicant countries as a cross-check for the trade analysis. The project will be completed by using a cluster analysis to identify specific integration areas within Europe. Growth, Structural Change, and the International Division of Labor 15

Another project examined whether international trade disputes arising from subsidization of national firms could be reduced by establishing an international subsidy supervisor. Subsidies have become one of the most important instruments for industrial policy purposes in recent years, especially for the purpose of promoting high-technology industries. However, the multilateral rules for the granting of subsidies and the imposition of countervailing duties are still rather weak and imprecise and subsequently leave great scope to national discretion. In order to mitigate the international frictions that are arising from subsidization of domestic firms and industries, an “open subsidy club” should be introduced. The establishment of such a club should include at least the following reform steps: (i) To overcome the problems associated with the current material injury test, a multilateral notification system should be introduced. It should provide that all plans to grant new subsidies or to alter existing subsidies are to be notified to and approved by the WTO Committee on Subsidies and Countervailing Measures. (ii) All subsidies should be ranked according to their potential competition (trade) distortion effects. It can be realistically assumed that the competition effects of subsidies are higher, the closer the respective subsidy base is to the end of the value-added chain of a firm. For each subsidy category, qualitative thresholds that limit the provision of subsidies to a certain fraction of the respective subsidy base should be set. It may be rather optimistic to believe that the strict thresholds proposed above will become reality in the near future. However, to facilitate further liberalization steps, one could think about establishing an open subsidy club that would provide a compromise between the economic need for stricter rules and the desire of governments to keep a “free hand” in the funding of domestic industries. The rules of this open club could provide that a country is free to exceed the thresholds proposed above if, and only if, a national subsidy program offers firms located in third countries open access on a conditional most-favored-nation basis. Countries joining the open subsidy club would be free to double the thresholds proposed above. An additional focus of research conducted by the Group was on the analysis of structural change in the labor market, with a special view to the effects of reservation wages on unemployment duration. The Group conducted an empirical study to test the validity of reported reservation wages using search theory. To do this, reservation wages were calculated using stationary search theory and job-search success observations of unemployed persons, and then compared with reported reservation wage data provided by the German Socioeconomic Panel (GSOEP) for western Germany. Potential selectivity caused by separate observations of successful and unsuccessful unemployed persons was accounted for

16 Research and Advisory Activities

by modifying the Heckman correction. For short spells of unemployment, it was shown that calculated and reported reservation wages correspond very well, whereas reported reservation wages exceed the calculated ones for the long-term unemployed. These results imply that the use of reported reservation wages in empirical studies is a valid research approach as regards the short- and medium- term unemployed. As concerns the long-term unemployed, there is doubt whether the reported reservation wages are valid in a theoretical sense and are, therefore, a cause for the individual persistence of unemployment or whether the unemployed are willing to accept jobs offered at wages below their reservation wage. Based on this study, a further empirical study was carried out. It examined the effects of reported reservation wages at the beginning of an unemployment spell on overall unemployment duration using the data of the GSOEP. The selectivity in the reservation wage observations due to only one interview per year in the GSOEP was taken into account by using the Heckman correction, and the possibility of censored spells was taken into account by using a hazard rate analysis with semiparametric unobserved heterogeneity. The results show that only by correcting the selectivity bias can the theoretically expected positive effect of reservation wages on unemployment duration be observed. The individual reservation wage is thus an important determinant of unemployment duration in Germany. The effects of unemployment benefits on reservation wages are highly relevant to the current debate on reforming the social security systems in Germany. The problem in empirical analyses is that the eligibility guidelines of the German unemployment insurance system are highly correlated with other determinants of reservation wages. Thus, the single effect of transfer payments on individual reservation wages is almost unmeasurable. To overcome this problem, reservation wages for distinct groups of unemployed were simulated in the framework of a dynamic search model. The realistic simulation of the German labor market in the search model was one important goal of this study. Another objective was to simulate the effects of the reform of the unemployment insurance system planned by Agenda 2010. The simulation shows that the reform of the unemployment transfer payments affects mainly unemployed persons who had a high income before becoming unemployed. For these persons, the transition rates in employment are even increased if they are eligible for social welfare. In- dependent of the level of income before unemployment, the highest transition rates were found for persons who are not eligible for social welfare. The development of qualification-specific wage differentials as one possible reason for the high unemployment of low-skilled persons in Germany was the Growth, Structural Change, and the International Division of Labor 17

subject of a further empirical study. Using GSOEP data, yearly wage regressions were run for all full-time employees, separated for eastern and western Germany. The results show that both in eastern and western Germany wages increase with the level of qualification, but wage differentials between qualification groups are smaller in eastern Germany than in western Germany in spite of higher differences in the qualification-specific unemployment rates. Moreover, the wage differentials between qualifications have remained constant over time in western Germany and also in eastern Germany after a wage adjustment in the early 1990s. Increasing qualification-specific wage differentials can lower differentials in qualification-specific unemployment rates in principle, but this has not happened in Germany in recent years.

B Technology and Growth

The Technology and Growth Group (headed by Michael Stolpe) continued to work on its two main topics: first, the role of financial markets in providing funding and in setting incentives for technological innovation, and second, the efficiency of technological change in health care, one of the fastest growing industries of the 20th century. These two seemingly disparate research areas are in fact closely related at the theoretical level, where the possibilities of developing an efficient institutional filter for new technological ideas under the con- dition of market imperfections are being studied. In the case of financial markets’ impact on technological innovation, the theoretical problem is to understand the implications of asymmetric information about the value of innovative ideas from high-tech start-ups. The asymmetric distribution of such information creates a variety of incentive problems which tend to keep passive outside investors, such as banks, from providing external finance to the extent that new high-tech firms require in order to expand and profit from their own innovative ideas. In the United States, the solution to this problem comes in the form of actively managed venture capital which, through its screening and monitoring activities, serves as a kind of filter for new technological ideas, so that outside investors can select with much more confidence from the wide variety of technological investment opportunities that are available at a given point in time. Although venture capital provision is a cyclical business, the net contribution from this relatively new form of financial inter- mediation should be a higher rate of return on capital and faster economic growth in the long term. In Europe, however, the development of venture capital has long been slow and its impact on the efficiency of primary equity markets has been negligible, but the situation began to change during the stock market boom of the late 1990s. A comparative empirical analysis of the efficiency of 18 Research and Advisory Activities

Europe’s markets for venture capital was therefore the focus of a long-term research project on European financial markets, venture capital, and high-tech firms. The project quantified empirically the factors which determine the efficiency of venture capital investments, measured by the difference between the price of initial public offerings and their subsequent first quotation on the stock market, also known as “underpricing” in the literature. With this project, the Group participated in an international research collaboration on European integration, financial systems, and corporate performance. In a related project, the Group used data from the venture capital project to study the nature of bubbles in primary equity markets. This research set out to test the proposition that such bubbles, also known as hot issue markets in the literature, may generate welfare benefits by providing a unique window for new technology-based firms to be rewarded for their innovation and to embark on a large- scale expansion. Cold issue markets, by contrast, do not provide the conditions that make initial public offerings from certain subsets of high-technology attractive to the issuers. Cold issue markets, the flip side of the bubbles, must therefore be considered a serious external financing constraint in the modern knowledge economy, along with similar adverse welfare implications such as credit ration- ing, which economists have hitherto viewed as the more important constraint in the financing of technological innovation. The Group continued its research on technological change in health care. Again, the central issue is how to filter new technologies—this time so as to prevent the adoption of welfare-reducing medical technologies. For certain ethical drugs, for example, the social benefits of research appear to fall short of the technology’s true opportunity cost to society. An appropriate filter would therefore provide a solution to the international problem of rewarding private innovators in line with the full social returns to medical innovation. There is a growing awareness among policy-makers in the advanced countries that medical research would be more efficient if the inventors of new medical technologies with very large social returns, such as life-saving drugs for common killer diseases, could appropriate a larger share of these returns and if research projects with social benefits that fall short of the technology’s social opportunity costs could be abandoned before the technology is widely adopted. Neither today’s drug approval authorities nor the practitioners of medicine have the appropriate incentives and information to identify and avoid welfare-reducing technologies or to increase the private re- ward for innovations with large social returns. The problem has an international dimension because most medical research is best exploited on a global scale and because efficiency gains in medical research and in the delivery of health care have moved to the top of the agenda for health Growth, Structural Change, and the International Division of Labor 19

care reform in many countries. But global efficiency may be undermined by individual countries attempting to free ride on the fruits of foreign research, for example, through strict price controls on imported drugs. The long-term welfare benefits from an efficient filter for new medical technologies should thus be further gains in mortality and morbidity reduction as well as efficiency gains in the delivery of health care and in medical research. In related work in the health economics field, the Group produced a survey of the global health economy which highlights and analyzes the key relationships linking the rich world’s major health systems. The analysis placed special emphasis on the allocation of resources, the measurement of medical outcomes, and the determinants of international variation. Moreover, it included an assessment of policy reforms in the major industrialized countries and a review of recent developments in the German, British, and U.S. health systems.

B European Institutions

The European Institutions Group (headed by Hugo Dicke) continued its work on the economic effects of the envisaged widening of the European Union (EU). In one of its projects the Group analyzed the duties and rights that the Treaty of Accession allocates to the member states. It was able to show that the current 15 member states have not sufficiently adjusted the EU institutions, the structure of competencies, or common policies to the demands of EU decision-makers made at the beginning of the negotiations with the applicants nor to the requirements of an enlarged union. Thus, the economic success of enlargement will be jeopardized by a number of inefficient institutional arrangements. Most probably, the reforms of the Common Agricultural Policy (CAP) and the Structural Funds, which are overdue, will become even more difficult; the new member states will be net beneficiaries of the CAP and the structural funds, and as such will not favor reform. Work was also continued on a project that deals with the economic determinants of cross-border labor flows in Europe. Taking immigration to Germany in the period 1974–1999 as a case study, productivity differences between the sending countries and the receiving country were identified empirically as one of the main determinants of labor flows. However, it also turned out that for international differences in productivity to be statistically significant, the stock of foreigners in the receiving country and the distance between each of the sending countries and the receiving country both have to be included as variables in the estimated equation. According to the empirical results obtained by the Group, variables representing the employment situation in the sending countries and the receiving country do not have any impact at all on migration. Also, variables 20 Research and Advisory Activities

embodying the demographic characteristics and the average level of schooling of the population in the sending countries were statistically insignificant. By contrast, dummy variables representing the shifts in immigration policy in Germany over the three decades studied were highly significant. The analyses focus on the period after the end of the guest worker program (1973) in which immigrants can be classified into four groups: (i) relatives of the guest workers already holding a permanent residence and work permit, (ii) citizens of the other member countries of the EU, (iii) ethnic Germans that acquired German citizenship after entering the country and their relatives, and (iv) refugees and asylum seekers. Another analysis of the results presented above showed that the theoretical model used—an extension of the Ricardo model including factor mobility— seems to be more appropriate to explain the level and composition of labor inflows to Germany than Hatton’s model, which is being used extensively in the labor-market-oriented migration literature. Hatton’s model was originally designed to study emigration from the United Kingdom and eventually became the standard microeconomic model in migration research. The central idea of this model is the relative probability that an emigrant might find a job in the host country which is better remunerated than at home. Taking into account the structure of immigrant flows to Germany and the conditions prevailing in the German labor markets since the end of the guest worker program, that probability does not seem to have been very relevant for individuals seeking an opportunity to immigrate to Germany. However, the comparison also indicates that employment variables need not be redundant in the extended Ricardo model if unemployment rates are interpreted to represent the degree of regulation of labor markets. Progress in this area is slow because empirical enquiries into these matters require data that are not yet available. Current analyses deal with these issues as well as with the relationship between labor flows on the one hand and trade and capital flows on the other.

B Social Security and Growth

The focus of research conducted by the Social Security and Growth Group (headed by Hans H. Glismann) was a long-run project on reforming the German unemployment insurance system conducted in collaboration with the International Economics and Structural Change Group. The underlying notion is that by making the unemployment insurance system more efficient in economic terms, the international competitiveness of German producers at large will be improved; in particular, unemployment will be reduced. Three subprojects were completed. The first subject dealt with whether a system of private unemployment insurance is feasible, and, if so, what specific features Environmental and Resource Economics 21

it should have. The Group is of the opinion that the popular arguments against private unemployment insurance, such as “moral hazard” and “adverse selection,” do not hold. It suggests establishing a dual-system model of private unemployment insurance that includes incentives on the side of employees as well as on the side of employers to reduce unemployment. Each employee should pay insurance premia according to his individual risk of becoming unemployed and according to his preference with respect to the individual level and duration of unemployment payments. On the employers’ side, the U.S. system of experience rating is elaborated in such a way as to increase, via autoregressive processes, the built-in tendencies to reduce unemployment. In addition, the Group analyzed the regulation necessary to operate this dual system. The second subproject dealt with the existing set of empirical data and how to transform these data in order to make possible a quantitative evaluation of the proposed reform of German unemployment insurance. Again, the distinction between a strict unemployment insurance on the employees’ side, and a feedback system of employment incentives on the employers’ side turned out to be important also as regards the fundamental statistics. In the third subproject that was completed, a model of the dual system of private unemployment insurance was calculated, using data and statistics for the year 2000. It was shown how much the individual employee would have to invest for a variety of unemployment payments and for a variety of individual “real” risks. In addition, it was demonstrated that each individual can reduce his insurance premium by simply declaring a higher degree of regional, professional, or income-related mobility. On the employers’ side it was shown that, via autoregressive processes, employment increases and that at the same time each em- ployer reduces the rate of his firm’s unemployment tax.

4. Environmental and Resource Economics (Research Department II)

Research activities in the Environmental and Resource Economics Department (headed by Gernot Klepper) focus on the allocation of environmental and natural resources. The factors influencing the increasing scarcity of natural resources are investigated and their impact on the allocation of factors of production and goods in the world economy is assessed. Its research focuses especially on the evaluation of international and national aspects of environmental policy measures leading to proposals for rational and efficient use of environmental policy instruments. 22 Research and Advisory Activities

The research activities of the Department in the year 2003 concentrated on the analysis of the relationship between economic growth and the availability of natural resources, the analysis of international and national environmental policy instruments especially in climate policy, and the use and control of biodiversity. A special methodological focus was given to the development of simulation models for the analysis of policy interventions. These models were based on computable general equilibrium models.

B Environmental Economics

The Environmental Economics Group (headed by Gernot Klepper) focused its research on issues of allocating environmental resources and on the design of environmental policy instruments for the achievement of national and international environmental objectives. The major policy areas investigated concerned climate policy and the preservation of biological diversity. International climate policy and the commitments laid out in the Kyoto Protocol for reducing greenhouse gas emissions constitute a central area of research of the Group. For the analysis of climate policy measures, the DART model has been used for several years. This model is a multiregional, multisectoral, dynamic computable general equilibrium model which was developed in the Department for the purpose of analyzing long-run development in the world economy. The major focus of this year’s research was on the international trade regimes with emission rights for CO2 and other greenhouse gases. As participants in the European Research Network on Emission Trading (Concerted Action on Trade- able Permits), the Group investigated the institutional and administrative requirements for the measurement and monitoring of emissions, the transfer of emission rights, and the penalties for noncompliance. In a so-called Policy Brief which is especially addressed to policy-makers, the competitiveness effects of different emission trading systems were laid out. These depend to a large degree on the design of the emission trading system, on the emission intensity of the sectors involved, and on the impact and degree of international competition for specific sectors. The largest impact on trade flows and competitiveness of industrial sectors obtains in emission trading systems which cover only a small open economy and are not matched by similar systems in other countries. Competitiveness is also an issue as regards the planned emission trading system in the European Union, which is to start in 2005. The Group modified the DART model in order to simulate the likely impacts of the EU trading system. It is now possible to simulate EU emission trading as it is outlined in the EU directives. First simulation results obtained by the Group show that emission trading across Environmental and Resource Economics 23

economies will be rather one-directional. Because of the very low abatement costs in Eastern Europe, the economies there can be expected to be the only exporters of emission rights once they participate in emission trading. The competitiveness effects of EU emission trading will depend to a large degree on the climate policies that are imposed on the sectors which are not part of the emission trading system. The emission trading system alone has only marginal effects on welfare and sectoral production. Only additional restrictions outside the emission trading system which are necessary for reaching the Kyoto targets will magnify the competitiveness effects. The simulation runs indicate that industries that participate in emission trading will be better off than industries that do not because the former can reap efficiency gains from emission trading. In addition, it turned out that the indirect effects on input prices for industries outside the emission trading system are stronger than the direct effect for those industries within the trading system. The impact on competitiveness is also influenced by the emission intensities in the various sectors and the various economies. The Group also used the DART model for model experiments in which the sensitivity and robustness of different models with respect to a particular climate policy are investigated. In a German modeling experiment (MEX IV), the Group investigated the long-term contribution of the German energy industry to EU climate policy. This also included the EU and international systems of emission trading. In a project dealing with the EU (Transition to Sustainable Eco- nomic Structures), the Group compared and assessed models while focusing on extending these models towards the analysis of sustainable development in general. In the second half of the year the Group began a new project that is concerned with the economic potential of labels for consumer protection and environmental protection. Labeling systems are increasingly being used as information instruments for consumer protection and environmental policy. Product and process labels play two very different roles. They provide detailed and in many cases verified information about the properties of a product or production process for the consumer. As such they reduce information asymmetries and thus market failures. On the other hand, labels provide producers with the opportunity to differentiate their products on the market and to signal specific product cate- gories. As such, labels can also be used as an instrument for market segmen- tation. Therefore, the use of labels can have some intended but also some un- intended consequences for the efficiency of markets. A first step in the research project consisted in a stocktaking and categorizing of different environmental labels. A first analysis yielded the following results: the majority of labels have been introduced in the food, electrical machinery, and 24 Research and Advisory Activities

textiles and clothing sectors. Participation is voluntary in most systems; only labels indicating warnings or dangers are obligatory. Labels introduced by government institutions and private labels appear in roughly equal proportions. The majority of labeling systems do not focus on specific product-related criteria but on production processes and production methods. Most systems have only national coverage. The analysis of the existing labeling systems is intended to identify the positive and negative impacts of such systems on actors in Germany as well as in developing countries and to assess their impact on international trade. One important aspect is the treatment of labeling systems in the WTO. The principle of open markets and the potential use of labels as nontariff barriers have not been resolved so far. Especially developing countries express skepticism about environmental labels because they could be used as trade barriers and they could discriminate against developing countries by imposing inappropriately restrictive conditions on production processes in these countries. The Doha conference has given a mandate to the Committee on Trade and Environment to further investigate the role of environmental labeling systems within the WTO framework. This theme is also discussed in the Committee on Technical Barriers to Trade, which has received numerous notifications concerning labeling systems. Environmental labels have thus become an issue in the trade liberalization rounds. Another area of research that the Group concerned itself with was the protection of biological diversity. There are several initiatives of the international community to slow down the continuing loss of biodiversity by introducing appropriate instruments. Two areas are of major importance. One is the conflict between the protection of biodiversity-rich areas and their commercial use. The other is the question as to whether the sustainable commercial use of biodiversity can provide private incentives to protect such biodiversity and thus can supple- ment government regulation. Public expectations have focused especially on the industrial use of genetic information as one of the private incentives to protect biodiversity. After having translated genetic information and biological material into economic terms, the Group incorporated the incentives for protecting biodiversity into a theoretical model. It turned out that the nonrivalry in the use of such genetic information and the uncertainty with respect to the value of that information reduce the willingness to pay and the incentives to preserve biodiversity significantly. Therefore, one can hardly expect that market processes would actually contribute to a large-scale protection of biodiversity. Whereas the private incentives to protect biodiversity come from the commercial use of that diversity, government interventions that protect biodiversity often Environmental and Resource Economics 25

focus on especially sensitive areas which need to be protected from human inter- ference. Since such sensitive areas are concentrated in a few regions of the world but the benefits from protecting their biodiversity accrue to all countries, the allocation of resources towards protection activities is especially important. One important protection mechanism is the Global Environmental Facility (GEF), which allocates transfers on a multinational basis to countries that protect biodiversity-rich areas. These transfers were investigated by the Group and results indicate that the GEF concentrates its efforts on already existing protected areas. This implies that the resources that are allocated by the GEF can only stabilize the protection of already existing areas but that they are not sufficient to finance a significant expansion of the global net of protected areas.

B Natural Resources

The major focus of the Natural Resources Group (headed by Manfred Wiebelt) was on the question of how the availability of natural resources influences economic growth and socially sustainable development. Important mechanisms which translate resource use into economic growth were identified. The Group also investigated how such resource use influences the distribution of income and poverty levels. These transmission mechanisms have also been included in an already existing simulation model based on a computable general equilibrium model. Finally, a number of country studies on Bolivia, Colombia, and Uganda were conducted in collaboration with different research institutes. These studies also focused on the relationship between resource use, growth, and poverty reduction. Resource abundance and specialization of an economy towards the extraction of abundant resources have turned out to be more of a curse than a blessing for many countries. For example, Sachs and Warner have shown in a cross-section study that resource-rich economies have been growing significantly more slowly since the 1970s than resource-poor economies. The results of other cross-section studies also indicate a negative correlation between resource endowment and income equality. Against this background, the Group analyzed country studies —especially Latin American country studies—in order to identify the mechanisms through which the economic use of natural resources affect economic growth and poverty. The most important determinants for the level of growth and the degree of poverty reduction turned out to be differences in horizontal and vertical diversification of the economy, as well as different ways of spending the government revenues which were obtained through royalties from the resource sectors. In addition, the institutional settings of the labor markets also seem to play an important role. 26 Research and Advisory Activities

In order to perform a quantitative analysis of the relationship between resource use, growth, and poverty, an applied dynamic general equilibrium model was modified and extended appropriately. An essential feature of the model is that it quantifies the accumulation of physical capital by various institutions over time. The model includes different options which economic actors can choose in financial and capital markets when they decide on their optimal portfolios. With this model, it is possible to analyze whether and how strongly foreign direct investment in natural resource sectors can influence growth and poverty reduction. It is also possible to quantify how restrictive access to capital markets can limit the diversification patterns in resource-using factors. The model was modified along three lines: (i) Government revenues were further disaggregated in order to identify the capture of resource rents in different sectors in more detail. (ii) The production structure of economies depending on natural resources was better represented by introducing a separation of production sectors into formal and informal activities. These sectors produce the same goods but they use different input combinations in the production process. (iii) Finally, the model was coupled with a micro-simulation model which represents the individual heterogeneity of the population and thus makes it possible to identify the impact of different development paths on poverty and income distribution. This model was used in a joint research project with the Development Center of the OECD to analyze the impact on poverty of the overall trade liberalization in Colombia at the beginning of the 1990s. The simulation results indicate that the removal of trade barriers contributed significantly to the reduction of poverty between 1988 and 1995. This is especially the case for poverty reduction in rural areas. The structural change induced by trade liberalization and the following increase in the demand for labor have provided additional income opportunities, especially for poor households. An important cause of these higher incomes came from the introduction of additional jobs in the formal sector and a higher participation rate of women in formal jobs. In a joint project with the Stability and Structural Adjustment Group, the structural adjustment process in Bolivia since 1985 was analyzed quantitatively, and further options which could lead to a growth process accompanied by poverty reduction were identified. The simulation results indicate that with the current policy measures the growth and the poverty reduction objectives can only be achieved if extremely optimistic assumptions about capital inflows are realized. A significant contribution to reducing rural poverty cannot be achieved even in this optimistic scenario. The simulation results also indicate that minor improvements in rural poverty are often neutralized through negative impacts such as El Niño or a change in the world market prices of primary products. Regional Economics 27

In a collaboration with the Instituto de Investigaciones Socio-Económicas in La Paz, the simulation model was used to analyze the impact of improvements in the Bolivian education system. In particular, it was used to determine the extent to which public investment in education can influence the decisions of unskilled labor to acquire additional skills. It was shown that investment in education could support special economic policies oriented towards improving infrastructure. Both the rural and urban unskilled labor can improve their income situation. The Group was also involved in a joint project with the Institute for African Studies of the University of Leipzig and the Institute for African Studies in Hamburg on poverty reduction measures in Uganda. The development of the income distribution and the poverty situation was examined using household surveys for the 1990s. It turned out that the high growth rate of GDP in Uganda in this period was accompanied by a significant reduction in poverty.

5. Regional Economics (Research Department III)

Within the thrust of the Institute’s research, the Regional Economics Department (headed by Rüdiger Soltwedel) focuses on the spatial perspective, on how centripetal and centrifugal as well as integrating and disintegrating forces are shaping the spatial division of labor. Hence, the Department’s research tries to answer questions such as whether the integration process fosters the agglomeration of economic activity or entails deconcentration; whether it is a positive- sum game for all of the regions or whether some of them are losing out; what the policy implications are and which regional governance structures are appropriate for succeeding in the indispensable process of institutional and locational competition. In 2003, the focus of the Department’s research activity was on analyzing the importance of agglomeration for innovation and economic growth, and on topics such as the new economy, mobility costs, the spatial division of labor, and efficient procedures of planning processes for infrastructure investment.

Regional Growth and Spatial Structure

The Regional Growth and Spatial Structure Group (headed by Dirk Dohse) focuses on the analysis of regional growth and income disparities and on the regional impact of European economic integration. A central theme of the Group’s research in 2003 was the measurement of agglomeration and the analysis of the effects of agglomeration on productivity and 28 Research and Advisory Activities

growth. The “dartboard approach” developed in the literature was applied to analyze the spatial concentration of innovative activities and high-tech industries in Germany. The Group found that the spatial concentration of new economy employment in Germany is considerable and, furthermore, clearly higher than the spatial concentration of other innovative activities such as inventing (measured by patent applications) or R&D. In another project, the Group analyzed the impact of agglomeration on the growth of young high-tech enterprises listed on the German stock exchange. The study is based on the hypothesis that agglomerations with a high knowledge density constitute a better breeding ground for the growth of young enterprises with knowledge-intensive production than other regions do. The results of the Group’s regression analysis confirm this hypothesis and, in addition, show that it is not only firm-specific factors, but also sector- and region-specific factors that determine the post-entry performance of young knowledge-intensive enterprises. In this respect, the Group’s findings differ from the results in the previous literature. In cooperation with the Financial Markets Research Area, the Group tried to identify the defining factors for the regional distribution of young high-tech enterprises in Germany. In this study, the Group had to apply special econometric procedures due to the count data character of the endogenous variable. The Group’s results show that the regional availability of knowledge (or of highly qualified labor) and risk capital are essential determinants of the regional distribution of high-tech enterprises. In a further project launched in 2003, the productivity effects of externalities of agglomeration were investigated. For the United States and several European countries (including Germany), recent empirical work found that, due to externalities of agglomeration, workers were more productive in metropolitan areas than in peripheral regions in the late 1980s. As a consequence, metropolitan areas should have been particularly attractive as locations for workers and firms. In fact, however, German metropolitan areas have continuously experienced losses rather than gains in national shares in population, output, and employment during the past decades. In contrast to earlier empirical investigations, but consistent with the general pattern of deurbanization, the Group found no indication of positive aggregate productivity effects of economic density in western Ger- many in the late 1990s. Tests showed that earlier investigations did not control sufficiently for structural differences between metropolitan and nonmetropolitan areas. In particular, earlier investigations did not take into account that labor productivity was higher in metropolitan areas just because average firm size was higher, and the share of service activities with comparatively high salaries was Regional Economics 29

higher. As a consequence, private returns from, e.g., firm-specific economies of scale, were misinterpreted as social returns from agglomeration of economic activity. The regional distribution of innovative activities in eastern Germany was thor- oughly investigated in the context of five German economic research institutes’ report on the economic development in eastern Germany. The Group particularly analyzed the spatial structure of patent activities in eastern Germany, the spatial structure of research and development, the regional distribution of Neuer Markt enterprises and of venture capital, and the regional distribution of technology- intensive start-ups. The results showed that eastern Germany is not a monolithic block as concerns its innovative potential, but is, rather, characterized by a very differentiated regional innovation structure. Besides Berlin and its immediate hinterland, it is particularly regions in Saxony and Thuringia that form the centers of innovative activities; a certain south-north differential in innovative strength, as is well-known for western Germany, can therefore be noted for eastern Germany as well. The agglomeration centers—especially Leipzig, Dresden, Halle, Jena, Erfurt, Chemnitz, and Berlin—perform much better than other eastern German regions with regard to the indicators of innovative activities named above. Two facts, however, give rise to concern. Firstly, even the eastern German technology centers do not reach the German average regarding most indicators (such as patent intensity and R&D intensity). Secondly, the dynamics of the catch-up process that could be felt up to the middle of the 1990s have come to a standstill by now. The start-up intensity in eastern Germany has fallen below the western German level, the share of eastern Germany in patent applications and R&D activities is stagnant, and the new economy is drastically underrepresented in eastern Germany. Research on the regional implications of European integration was continued, with particular emphasis being given to the eastern enlargement of the EU, in a project that is scheduled to last until 2005. In cooperation with six other European research institutes, the Group is analyzing empirically the interrelation between industrial location, regional specialization, and regional income during the EU integration process. During the first phase of the project, the focus of work was on deriving a common theoretical and analytical base. In the current (second) project phase, a large regional data set (with, for example, long time series on sectorally disaggregated employment data) is being completed and analyzed. The results will be used for a series of country studies. During the third phase, starting in mid-2004, further and more comprehensive results on the relationship between integration and regional structural adjustment will be obtained by using econometric analysis. These results will allow inferences to be drawn about potential evolutions of EU regions in the aftermath of the eastern 30 Research and Advisory Activities

enlargement. During the final phase of the project, the Group will identify regions endangered by a potential economic downturn, assess the challenges posed by integration for regional policy on the EU, national, and local level. Since the ongoing integration process has raised worries in the public that EU regions might lose competitiveness and suffer deindustrialization and job losses, the EU Commission has continuously expanded structural funds and targeted them towards the cohesion of countries and regions. Therefore, in a further, normatively oriented project the Group analyzed (i) whether there is a case for such compensatory structural policy, (ii) whether the EU administrative level is appropriate for implementing it, and (iii) whether the instruments adopted are appropriate for achieving the objectives. Whether or not there is a need for compensatory policy in the course of integration is very controversial: Considerations based on new economic geography suggest that it cannot be rejected completely on theoretical grounds. Existing empirical studies, however, do not give evidence of ever-growing regional disparities. Regarding policy, public choice theory suggests choosing the administrative level with respect to the geographic extension of externalities and the degree of homogeneity of preferences for public goods throughout the EU. Against the background of these considerations, the current EU regional and structural policy, with its highly interventionist stance, appears inappropriate and, moreover, inefficient. A reform of the structural funds is therefore absolutely essential, particularly with a view to the forthcoming eastern enlargement.

Regional Economics and Institutions

Research in the Regional Economics and Institutions Group (headed by Rüdiger Soltwedel) focused in 2003 on the efficiency of alternative assignments of competences and alternative institutional arrangements for competition and regulation policy pertaining to the EU’s network industries, and on an institutional economic analysis of the efficiency of planning, decision, and approval processes for infrastructure investments. The Group continued its research on the allocation of competences for regulating the EU’s network industries. This research focuses on employing institutional- economic and contract-theoretic considerations to derive normative criteria for an efficient allocation of regulatory competences between (and within) the EU and its member states, and for the institutional design of regulatory policymaking on the different vertical levels. It was based on an analysis of the consequences of alternative institutional arrangements for the possibilities and the incentives to monitor both the regulated firms and the regulator himself. This research concentrated on the institutional prerequisites for the establishment of (politically) Regional Economics 31

independent regulators and the comparative advantages and disadvantages of such regulators. It used contract-theoretic reasoning to analyze the basic implications for transaction costs and the efficiency of regulating the establishment of independent regulatory agencies (with specific goals assigned to such agencies that differ from those of the overall public policy). The implications analyzed included the role independent agencies may play in solving time-inconsistency problems of regulation, the impact of “independence” on the regulator’s incentives to acquire and use regulation-specific information and expertise, and the impact on the danger of regulation being captured by specific interests. The institutional prerequisites and the problems of credibly delegating tasks to independent agencies and of controlling these agencies were also analyzed. The Group completed a project on ways of evaluating and removing bottlenecks in air transport infrastructure, which was carried out in cooperation with the Transportation Economics Group. The project’s aim was to identify institutional obstacles that might prevent establishing an efficient air transport infrastructure policy and to devise institutional reform options that may remove these obstacles. In the first part of the project, the fundamental problems inherent in any efficiency-oriented infrastructure policy for the air transport sector (the multitude and uneven spatial spread of externalities that are generated by the operation of airports, the existence of market power, imperfect information, and time inconsistency and commitment problems) were identified. Their effects on the efficiency of alternative modes, i.e., the “market,” “negotiations between interested parties,” “politics,” and “bureaucracy” were analyzed. The second part of the project was devoted to case studies that allow experiences with different institutional arrangements for infrastructure planning to be analyzed empirically. The case studies covered major infrastructure sectors in Germany as well as the airport sectors in England and Switzerland. It appeared that infrastructure policy has to face similar problems in all the sectors and countries covered. These include very time-consuming planning processes, strong resistance of local pressure groups to new infrastructure projects, noncredible planning commitments and, as a result, very high transaction costs of infrastructure policy in general. Although some of these problems are inevitably linked to the nature of air transport infrastructure policy, they are aggravated by inadequate institutional arrangements governing the planning and approval processes. In the third part of the project, the theoretical and empirical results obtained were used to derive guidelines for an efficiency-oriented reform of the existing institutional arrangements for air transport infrastructure decision-making. The key elements of these guidelines are: (i) Everybody affected by the building and 32 Research and Advisory Activities

operation of new air transport infrastructure should be given more extended and more effective rights to participate in the planning processes, and the results of planning approval procedures should be given more long-run validity. (ii) The right to individual compensation for those strongly affected by the operation of new infrastructure facilities should be strengthened and the possibilities to credibly implement environmental standards and/or restrictions on the use and further extension of airport facilities should be enhanced. (iii) An institutional setting should be implemented that explicitly allows for efficient administration (i.e., monitoring, interpretation, and adjustment) of planning approvals as well as compensation duties and environmental standards over time. (iv) The prospects for effective federal (interregional, institutional) competition for more efficient policy approaches to infrastructure planning and approval should be improved. In addition to these guidelines, the complete material privatization of airports is seen as an effective measure to enhance the efficiency of air transport infrastructure planning.

Transportation Economics

Research in the Transportation Economics Group (headed by Claus-Friedrich Laaser) focused on the impact of changes in transport and communication costs on spatial patterns of production, consumption, and housing, on the infrastructure endowment of eastern Germany, and on a specific project of private financing transport infrastructure. The Group completed a project on the consequences of administratively imposed surcharges, taxes, and user fees on transport services for the spatial pattern in the division of labor in Germany. Transportation-relevant public duties and fees, such as the so-called eco-tax or the distance-proportional motorway user charge for heavy trucks, might well hurt the competitive position of remote regions by increasing the costs of bridging distances. This might affect the locational choice of firms or households and change the patterns in the interregional division of labor. The Group applied a simulation approach to freight transport which combined transport cost intensities derived from the national accounts with the impact of interregional linkage and related distances on transport costs as estimated from a gravitation model. The results show that the impact of transport costs is almost twice as high in regions at the national periphery (illustrated by Schleswig-Holstein) as in central regions (illustrated by the Rhein-Main area). However, the share of transport costs in gross production values in most industries is less than two percent. Remote regions are indeed more affected in absolute terms by distance-proportional charges than central regions due to the greater relevance of distances for their interregional linkages, albeit at the re- Regional Economics 33

ported low percentage in production values. Accordingly, regional structures will be accentuated by such duties but not additionally distorted. The Group computed the patterns in regional burdens caused for private car traffic by the eco-tax by using regionally disaggregated trip data. Additional burdens imposed by the eco-tax are distinctly higher at the periphery than in the core cities of agglomerations, but are still even higher at the utmost urban fringe. Neither as regards freight transport nor private car traffic will the analyzed duties and fees, at least at the current level, trigger substantial relocations. A project on the spatial effects of the new economy was completed as well. It focused on changing patterns in the interregional division of labor as a consequence of the increasing application of the Internet, e-commerce, and other modern types of information and communication technologies (ICT) in production, product distribution, and marketing. The Group analyzed empirically the impact of ICT and e-commerce on urban specialization with respect to various types of jobs and occupations. In cooperation with the University of Dortmund, it deployed and analyzed a regionally and occupationally disaggregated data base in order to obtain evidence on the regional concentration of jobs either with a high or low requirement of “face-to-face” contacts, i.e., management versus manufacturing jobs. The results for the period 1976 to 2002 show that the specialization on management jobs relative to manufacturing activities remains mainly an urban phenomenon. The “white collar/blue collar” job ratio is not only traditionally high in core cities of agglomerations but has even increased substantially from 1995 on. The specialization on “white collar” jobs, as well as its increase, varies positively with the degree of centrality of a district. Due to their close connection to transactions requiring “face-to-face” contacts, core cities can be expected to continue to play an important role in the interplay with their hinterland as centers of exchange and spillovers even in the Internet age. Based on these empirical results, the Group elaborated the foreseeable implications of ICT-driven structural change for spatial planning. Although the Inter- net will hardly bring about the often proclaimed “death of distance” and “decline of cities,” land use planning and urban development policies will have to react more flexibly to the new challenges posed by accelerating structural change. The Group’s contribution to the aforementioned progress report for eastern Germany comprised a thorough and regionally disaggregated investigation of the infrastructure endowment of eastern Germany. The starting point of the analysis was the question whether eastern Germany actually is still substantially lagging behind in this respect compared to western Germany. The investigation focused on transport infrastructure and deployed a gravity model to assess the relative situation in eastern Germany. The results indicate that there are still gaps in its endowment with transport network capacities. However, it would be exaggerated 34 Research and Advisory Activities

to qualify these gaps as constituting a region-wide growth-inhibiting factor. Many regions in eastern Germany do suffer from disadvantages with regard to accessibility compared to their neighbors in western Germany, but a substantial part of these disadvantages can be attributed to their unfavorable location relative to the centers of economic activity in Europe. In addition, the population density is markedly lower than in western Germany. To envisage the same network density per surface unit would be highly questionable both from a cost and an environmental perspective. Accordingly, future infrastructure projects should be pursued using a strict individual cost-benefit analysis. Against the backdrop of scarce public funds, infrastructure investments should primarily be made where they will contribute most to economic development; this is most probably the case in agglomerations, as infrastructure bottlenecks are more severe in agglomerations than in remote regions. The Group continued its previous investigations into the potential and limits of private financing transport infrastructure by analyzing a specific project, the planned fixed Fehmarn belt link between Germany and Denmark. In principle, such large-scale projects as bridges or tunnels are most likely suitable for private financing. The reason is that such objects usually cannot be circumvented by using competing toll-free infrastructures. Principally, therefore, the Fehmarn belt link is well suited for private financing. The project also appears to be a consistent extension of the existing system of fixed links in the western Baltic which has been established by the opening of the Great Belt and the Öresund links and which would be completed by establishing a link on the Fehmarn route which would provide the shortest sea crossing between Scandinavia and the Continent. Nevertheless, toll revenues that may be expected from road traffic will presum- ably not be enough to yield a sufficiently positive rate of return to finance the project completely privately, and potential revenues from rail traffic will also be insufficient. Therefore, the project will not be able to be realized without substantial public subsidies or guarantees. More detailed traffic forecasts will have to indicate whether the project can be expected to render an indirect profitability (i.e., increasing tax revenues as a result of project-induced additional value added in the project region) which is sufficient to justify the inevitable public support of the project. Any decision in favor of the project will ultimately be of a political nature. In this case, state-guaranteed credits are the most suitable way of financing. However, the governments involved should be aware of the fact that guarantees bear substantial risks to the public budget. Development Economics and Global Integration 35

6. Development Economics and Global Integration (Research Department IV)

In the Development Economics and Global Integration Department (headed by Rolf J. Langhammer), research is principally targeted toward two major issues: First to analyze the interactions between growth, structural change, and income distribution in developing countries and emerging markets integrated in international goods and factor markets. Second to analyze the prerequisites of monetary and exchange rate policies which are necessary to ensure macroeconomic stability in the process of economic growth. In 2003, individual research projects focused on the empirical evidence for value-added effects of foreign direct investment in developing countries, on less segmented labor markets in developing countries, on national, regional, and multilateral trade policies, and on the determinants of student performance in industrialized and industrializing countries. Further, research was directed at reforms of multilateral regulatory systems and the relationship between monetary cooperation and regional integration.

International Capital Flows

The focus of this Group (headed by Peter Nunnenkamp) continued to be on two issues: (i) the determinants and effects of foreign direct investment in developing countries, and (ii) the consequences of structural reform programs on the distribution of income in developing countries. The Group presented a detailed analysis of the attractiveness of particular developing countries for foreign direct investment and the macroeconomic effects of such investment. Latin America received particular attention. The recent boom of foreign direct investment notwithstanding, Latin America continued to lag behind Asian competitors with regard to various locational factors. Moreover, expectations that foreign direct investment would provide a major stimulus to economic growth in Latin America were largely disappointed. The study concluded that the debate on locational attractiveness must not be confined to economic policy reforms along the lines of the Washington Consensus, but should take due consideration of the endowment of complementary factors of production and institutional aspects such as the rule of law. Likewise, a broadly based investigation into the possible causes of the poor growth performance of Arab countries revealed that their relatively weak attractiveness for foreign direct investment provides a partial explanation at best. In various Arab countries, an insufficient 36 Research and Advisory Activities

endowment of human capital and institutional deficits appeared to be more serious bottlenecks to growth. The Group also analyzed the hypothesis that the relevance of determinants of foreign direct investment and its growth effects depend on the specific context in which foreign direct investment is undertaken. Intellectual property rights, the protection of which is frequently considered an important determinant of foreign direct investment, served as an example to analyze the role of host-country conditions and industry characteristics. The study underscored the need for a disaggregated analysis of foreign direct investment in developing countries. Stronger protection of intellectual property rights induced higher foreign direct investment in host countries with a moderate capacity for local imitation. The effects remained insignificant, however, in more advanced host countries in which strong protection of intellectual property rights provided an incentive to substitute licensing for foreign direct investment. At the same time, the protection of intellectual property rights turned out to be more important in human- capital- and technology-intensive industries than in less sophisticated industries. Apart from its effects on the quantity of foreign direct investment, stronger protection of intellectual property rights tended to induce higher-quality investment, e.g., by increasing the technology content of foreign direct investment. The policy implications of these findings were discussed with regard to the initiative to agree on investment issues such as nondiscrimination under the roof of the WTO. The Group critically evaluated the proposition that such an agreement would improve the prospects of developing countries for more foreign direct investment. It was also pointed out that the cost-benefit calculus with respect to a multilateral agreement on investment is likely to differ across developing countries, considering that positive growth effects of foreign direct investment are likely to be context-specific. This expectation was substantiated in a study on U.S. foreign direct investment in developing countries which differentiated according to industry characteristics, investment motives, and host-country conditions. The growth effects of foreign direct investment differed not only between the services sector and the manufacturing sector, but also between specific manufacturing industries. For- eign direct investment that could be classified as efficiency-seeking had stronger growth effects than purely market-seeking investment. In less advanced host countries, higher foreign direct investment did not result in higher subsequent growth. The Group concluded that, especially for these host countries, it makes little sense to lure more foreign direct investment by offering special incentives. The Group continued its research agenda on the distributional effects of structural reforms in Bolivia. According to the academic literature, there are three Development Economics and Global Integration 37

channels through which structural reforms impact on the distribution of labor incomes in developing countries: (a) the sector-composition channel, (b) the factor-substitution channel, and (c) the rent-shifting channel. The Group captured the transmission mechanisms of, and the interactions between, these channels in two theoretical models and derived qualitative hypotheses on the distributional effects of structural reforms. The first model focused on the wage distribution between the formal and the informal sector, while the second model dealt with the wage distribution between skilled and unskilled workers. In both cases, the distributional effects of most policy components of structural reforms turned out to be ambiguous, belying oversimplified statements for or against structural reforms made in the opposing camps. In a next step, the Group tested the theoretical models empirically for the case of Bolivia. Various decomposition techniques revealed, on the one hand, that the wage differences between the formal and the informal sector rose at the beginning of the Bolivian structural reform process, but declined thereafter. By contrast, on the other hand, wage differences between skilled and unskilled workers increased throughout the whole observation period. The latter result highlights the necessity to improve primary and secondary education in Bolivia. Furthermore, the Group started to analyze the impact of structural reforms on the incidence of absolute poverty in Bolivia. In order to be able to account for economies of scale within the households and for differences in preferences between adults and children in the measurement of poverty indices, the Group began to estimate equivalence scales for the urban and rural areas of Bolivia.

Industrialization and Foreign Trade

The Group (headed by Matthias Lücke) continued its research on the effects of regional and multilateral trade liberalization. Jointly with a Russian partner institute (New Economic School), a computable general equilibrium model (CGE) was applied to assess the effects of a free trade agreement (FTA) between the EU and Russia. Various versions of such an agreement suggest that the welfare gains for Russia are particularly sizable (more than 10 percent against the baseline scenario) if a comprehensive FTA with an enlarged EU goes beyond narrow trade liberalization, for instance, by including the harmonization of institutional arrangements and liberalization of services and agriculture. An FTA confined to industrial goods liberalization would have welfare gains of only mere fractions of one percent. 38 Research and Advisory Activities

A joint project with the Indian CUTS Center for International Trade, Economics, and Environment on the consequences of the Chinese accession to the WTO for the textiles and clothing industry of competing developing country suppliers was concluded. Especially in the case of India the results indicate that there is a relationship between the negative effects to be expected for the competing suppliers and the reform delay. Therefore, policy conclusions were made which comprise reform measures that go far beyond the textiles sector and pertain to the general trade liberalization agenda of India in the context of the Doha round negotiations. Another enquiry focused on the effects of the Chinese WTO accession on the Chinese automobile sector. Again, using a CGE model, it was shown that ap- proaching cost structures relevant to global markets will lead to a similar division of labor as in other producing countries which have opened to international markets, i.e., an increase of imports of components and parts (intermediates) and increase in domestic assembly production. Two studies on the liberalization of international service trade were concluded. The first, which analyzed the concessions offered on services after the Uruguay Round, showed there was a substantial difference in the depth of liberalization between capital-intensive and knowledge-intensive services, on the one hand, and labor-intensive services, on the other hand, which remained highly restricted. Second, the liberalization offer of the EU in the Doha round negotiations shows that there is a large number of EU-member-state-specific offers, so that the EU is still far from the state of being a customs union in the trade in services. Finally, research was initiated, jointly with the Stability and Structural Adjust- ment Group, on the effects on market volatility of integrating domestic financial markets in EU accession countries into international markets. Early results suggest that unlike in the emerging markets where volatility rose, volatility in the accession countries decreased, probably due to the stabilizing effects of the EU regulatory framework now relevant for the accession countries.

Human Capital and Economic Growth

The Human Capital and Economic Growth Group (headed by Erich Gundlach) focused its research on the ongoing project on schools and student performance. The major topic of this project is to estimate so-called education production functions using data generated by the OECD Programme for International Student Assessment (PISA). In cooperation with the ifo Institute and the Deut- sches Institut für Internationale Pädagogische Forschung, the task is to find out whether differences in schools across countries can be shown to explain, at least Development Economics and Global Integration 39

partly, the substantial differences in student’s reading ability across countries which have been identified by PISA. The database includes the test results and background information for all individual students from more than the 30 countries that participated in PISA. In the empirical analysis, the individual test result in reading (as well as the test results in mathematics and science) is the variable to be explained; sociodemographic variables, variables measuring education expenditure, and variables measuring schools are held to be explanatory variables. In principle, this approach can be used to identify the relative contribution of the various explanatory variables to student performance. The results of this project will also show the robustness of the previous results obtained by the research group as regards the determinants of student performance. In cooperation with the Zentrum für Europäische Wirtschaftsforschung (ZEW) and Maastricht University, a study was completed that attempted to identify determinants of schooling performance in the Central European transition countries. The major finding was that measures of family background exert a strong influence on student performance in these countries, whereas measures of schooling resources and measures of within-country variation in schools appear to be less important. Overall, the transition countries can be classified into two groups: Slovenia, the Czech Republic, the Slovak Republic, and Hungary reveal high student performance on average, together with a high degree of variation, and a very strong influence of family background, which is a result that can also be found for western European countries. By contrast, Latvia, Lithuania, and Romania reveal a relatively low degree of variation in student performance, which is similar to previous findings for socialist countries. In a further completed study using a combined data set taken from the Third International Mathematics and Science Study (TIMSS) of 1995 and 1999 (Re- peat), it could be shown that central exams generate effects that are somehow comparable to the effects of a “unit of exchange” of the education sector. Central exams provide a transparent measure of the value of a certain education, similar to the information that is provided by using a common currency in market transactions. In the education sector, a common measure of value appears to be necessary to reduce information asymmetries and to avoid opportunistic behavior by all agents involved. Thus, central exams can be seen as a precondition for achieving high student performance in decentralized schooling systems. The complementarity between central exams and school autonomy was analyzed in a principle-agent model of education production. The microeconometric estimates, which allow for interaction terms between central exams and school autonomy, show that central exams have, in fact, a strong positive effect on student performance. In schooling systems without central exams, school autonomy often has a negative effect on student performance. The results further suggest 40 Research and Advisory Activities

that in schooling systems with central exams, the negative performance effects of autonomy tend to disappear almost completely and turn into positive effects once the individual school can also decide on teacher salaries. These findings seem to suggest that an efficient education policy should aim at combining central exams with school autonomy, such that schools can decide by themselves how best to achieve the externally given standards. In a comprehensive review of the relevant literature, the Group considered which implicit rates of return on schooling could be realized across various European labor markets. A general result of this literature is that an additional year of schooling always goes hand in hand with higher income. The rate of return on an additional year of schooling seems to vary between 4 percent and 11 percent, on average, across western European countries. The United Kingdom and Ireland apparently realize the highest rates of return on schooling, and the Scandinavian countries the lowest, with Germany lying in between. Compared to the United States and other countries, the rates of return on schooling in continental Europe turn out to be rather low. However, the review of the literature revealed that international comparisons of the available empirical results are often problematic because many previous studies relied on methodologies that have recently been criticized for a number of reasons. Hence, it remains to be seen whether studies that use consistent empirical methodologies would come up with a different result for the rates of return on schooling across European labor markets. In addition to the studies on the microeconomic aspects of human capital formation, the Group also continued its macroeconomic work on aspects of growth. In a study that was conducted with two participants in the Institute’s Advanced Studies Program, the Group considered whether economic growth would encourage factor price equalization in a trade model. In the literature it is suggested that growth does not encourage factor price equalization. However, this result can be shown to depend on rather specific assumptions regarding the neutrality of technical change. For instance, if technical change is assumed to be sector-biased and factor-biased, which does not appear to be in conflict with empirical evidence, then economic growth may actually lead to factor price equalization in a neoclassical trade model. Another study that was completed reconsidered the two seminal contributions to the economics of growth by Robert M. Solow. One way or another, these two studies are still the major workhorses of ongoing research on the empirics of growth. Hence, it is all the more surprising that the methodological differences between the two Solow approaches, though long known, have been almost completely ignored in the recent applied literature. The study shows that the basic insight of the Solow growth model is obviously in conflict with the Development Economics and Global Integration 41

interpretation of the Solow model that dominates the recent applied literature. That is, the Solow model predicts that international differences in “technology” and not international differences in factor accumulation explain the international differences in output per person. But in the recent literature, empirical studies that point to a large role of international technology differences have mainly been interpreted as evidence against the Solow model. What can also be shown is that the Solow model provides a theoretical framework for the new literature on “institutions vs. geography,” which no longer considers factor accumulation to be key for development.

Stability and Structural Adjustment

This Group (headed by Rainer Schweickert) worked on macroeconomic stabilization and on development strategies. With respect to macroeconomic stabilization, the relationship between stabilization and structural adjustment was analyzed. A new research project focused on the actual and optimal role of the (real) exchange rate in the definition of monetary policy in emerging market economies with flexible exchange rate regimes. A theoretical paper revealed that alternative strategies—inflation targeting, the Taylor rule, monetary conditions index, and managed floating—can be described by reaction functions for the central bank which use the short-term interest rate as an important or even the single monetary policy instrument. This allows a generalized reaction function to be derived which includes the alternative strategies as special cases. This generalized reaction function shows that the money market interest rate depends on the deviations of the inflation rate, the output, and the exchange rate from their targets. A first empirical investigation demonstrated that the exchange rate actually plays a significant role for the conduct of monetary policy even in countries which claim to be free floaters and to follow an inflation targeting approach. Vector autoregressive models for Poland and Chile revealed that Polish monetary policy of the 1990s showed a clear break in 1998 when the exchange rate as the nominal anchor was replaced by inflation targeting but the exchange rate still played a systematic role in determining monetary policy. In Chile, the inflation targeting regime was in place for the entire sample period which did not show any systematic role of the exchange rate. However, exchange rate policy was used discretionarily in order to protect the Chilean economy from spillovers from international financial turmoil. Another aspect of the relationship between macroeconomic stabilization and structural adjustment which was analyzed was the endogeneity of the optimum currency area criteria. The results from empirical papers which claim to find a 42 Research and Advisory Activities

positive effect of monetary integration on trade integration were checked by estimating the trade gains arising from constituting a currency union for the members of the euro area. Based on a gravity model and using dummies for the 1999–2001 period, no consistent significant trade effects from the 1999 creation of EMU were found in a sample running from 1980 to 2001. Treating EMU not as a single event but as a part of a long-term integration process, and representing it by a series of continuous cross-country interest differentials, the evidence is stronger but does not depend on any single, specific exchange rate arrangement. Research on development strategies focused on the search for a new consensus on strategies to foster both economic growth and poverty alleviation. Two projects were completed which analyzed the relationship between macroeconomic reforms and institutional conditions on poverty alleviation. In the case of Bolivia, the Group found that the persistence of poverty in Bolivia is largely due to the lack of export dynamics and mobilization of domestic savings, and to the presence of entry barriers to formal labor markets. In the case of the agricultural supply response in Sub-Saharan Africa, the results from econometric time-series and cross-country investigations indicate that improvements in agricultural productivity could be achieved if agricultural and macroeconomic reforms were combined with public investment in physical and human capital. These results were put into a broader perspective of the discussion about a post- Washington Consensus. In principle, economists seem to agree on goals rather than on instruments. The post-Washington discussions added poverty reduction as an explicit element of a reform agenda. Well established is also the priority of monetary and fiscal stabilization, which should be closely followed by trade liberalization and financial market reform. However, the elements of a pro-poor growth strategy are still heavily debated. Nevertheless, the Group was able to derive some win-win options from a comparison of economic and social development in Latin American and rapidly growing Asian countries. Efforts to alleviate poverty and reduce extreme inequalities should focus on measures which enable the poor to accumulate assets und thus to increase their future earning capacities. The highest priority should be given to improving the quality of human capital formation at the primary and secondary education level. As witnessed in East Asia, a strong basic education system would not only help alleviate poverty but also contribute to long-run growth. Labor market reforms which facilitate migration from the informal sector to higher-paid formal employment are likely to reinforce the positive impact of these investments in human capital. The same is true as regards strengthening vocational training. A comprehensive titling program for land and property would constitute another Business Cycles 43

possible win-win option, as it would help poor people to use their assets more productively, for instance as collateral. In rural areas, such a titling program could only be effective if it were complemented by a market-based land reform which achieved a more equal distribution of land without relying on expro- priations. Extended access to credit along these lines would be a promising instrument for the establishment of small and medium-sized enterprises, all the more so if it were combined with the deregulation of firm entry conditions and the provision of extension services. Taken together, these reforms could contribute to higher social mobility, a more flexible economic structure, and a more dynamic development of investment and exports, which would, in turn, be reflected in higher and more equitable growth. The Group completed its analysis of reform strategies by critically evaluating international support in the form of aid. Aid flows to developing countries have experienced a marked decline over the last decade. The main reason for this decline appears to be that donors have increasingly become aware of the failures to promote growth and alleviate poverty in recipient countries. Reforms in three areas are the most promising way to increase aid effectiveness. First, aid should be concentrated on poor countries with reasonable policies, and institutions that can implement these policies. Second, donors should encourage policy reform by withdrawing support from badly governed countries and by strengthening reform ownership. Third, in an improved policy environment, investments in agricultural research and the treatment of tropical diseases could help overcome the geographical disadvantages that confront most of the poor people in the tropics. With these reforms, aid might live up to expectations, but it has to be kept in mind that political factors, such as strategic motives among donors, can easily block their implementation.

7. Business Cycles (Research Department V)

The Business Cycles Department (headed by Joachim Scheide) analyzes and forecasts the cyclical development in the world economy, with a particular focus on Germany, the euro area, and other industrial countries. Furthermore, strategies for economic policy are analyzed in order to evaluate whether they can contribute to price stability, economic growth, employment, and a more stable cyclical development of output. The development of the theoretical basis for understanding and forecasting business cycles is a central task of the Department. In addition, modern econometric methods are used to improve the empirical basis for the forecasts and 44 Research and Advisory Activities

the assessment of economic policy. The Department uses several databases to analyze business cycles and public finances, and continuously updates these databases by adding national and international data from official and nonofficial sources. Four times a year, the Department analyzes the business cycles and prepares forecasts which are published in the journal “Die Weltwirtschaft” and also as “Kiel Discussion Papers.” In addition, special topics related to business cycle research and macroeconomic policy are published. In the spring and in the fall, the analyses focus particularly on world economic events and issues related to the business cycle and economic policy in the euro area. These publications also serve as the basis for the traditional “Kieler Konjunkturgespräche” (Kiel Busi- ness Cycle Conference), a meeting at which national and international experts discuss the outlook for the world economy. In the fall and in the spring, the Department, together with the other five major economic research institutes in Germany, prepares an extensive report on the business outlook in Germany and the rest of the world and on current issues of economic policy. This report, which is financed by the federal government, is then presented to the public. The analysis of economic policy and the cyclical development in the euro area was a major topic of business cycle research. In 2003, the Department continued and intensified its cooperation, started several years ago, with eight other Euro- pean research institutes, these being: CPB, The Hague; DIW, Berlin; ESRI, Dublin; ETLA, Helsinki; NIESR, London; OFCE, Paris; Prometeia, Bologna and Wifo, Vienna. This international network of institutes, named EUROFRAME, prepares joint forecasts and policy analyses for the euro area and the European Union; furthermore, the network cooperates in the field of basic research on the macro economy. In addition, members of the Department regularly participate in conferences of the Association d’Instituts Européens de Conjoncture Economique (AIECE), a large network of European research institutes.

Basic Business Cycle Research

Research in this Group (headed by Kai Carstensen) focused on two projects on monetary developments in the euro area. In the first project, the reaction function of the European Central Bank (ECB) was analyzed by means of econometric methods. It was found that the money growth rate, which was particularly emphasized in the original two-pillar strategy of the ECB, is not of prominent importance for the policy decisions of the ECB. There are other, theoretically founded measures like money overhang that are better suited to explaining interest rate decisions. Since these measures are not part of the monetary pillar of the ECB strategy, this finding indicates that the ECB did not actually allow Business Cycles 45

money growth to play the dominant role which it publicly proclaimed. Against this background, the May 2003 policy revision of the ECB, which implied less importance for money growth, can be interpreted as a step towards reconciling the official ECB strategy with ECB common practice. Therefore, this revision cannot be expected to change the observable reaction function. In the second monetary project, the stability of the money demand function in the euro area for the period until the end of 2002 was analyzed. A similar analysis in the previous year yielded preliminary evidence for structural instability. Using a recently developed testing procedure and an updated data set, the result was that money demand in its common specification, i.e., depending on income, interest rates, and inflation, has become unstable since the end of 2001. Since stable money demand is seen as a prerequisite for the use of money growth as an indicator for future inflation, this result undermines the monetary pillar of the ECB strategy. When two financial variables, namely stock prices and stock market volatility, were included in the money demand function, stability could be restored. However, the dependency of money demand on stock market developments implies that it will become even more difficult to assess the future inflationary effects of monetary expansion. In addition to its monetary projects, the Group carried out a project concerning the productivity of public investment in OECD countries. Since the end of the 1980s, there has been an increased debate in the economic literature about whether the public capital stock is productive or not. Empirical studies of the productivity of the public capital stock have been limited to a small number of countries for which official estimates of the capital stock are available. In the Group’s project, internationally comparable estimates of the public capital stock were produced for 22 OECD countries for the period 1960–2001 using the so- called perpetual inventory method. Based on these estimates and with the help of various econometric methods, the Group investigated the productivity of the public capital stock in these countries. The estimation results from applying single equation regression models (production functions) and cointegrated vector autoregressive models suggest that the public capital stock has statistically significant positive output effects in the majority of countries. Against the background of the empirical results, a theoretical analysis was carried out using a stochastic dynamic general equilibrium model. The results of this analysis show that the financing decision plays a crucial role for the dynamic effects of a policy-induced change in the public capital stock. Whereas financing additional public investment through an increase in government debt appears to be beneficial in the short run, in the long run this financing alternative is sub- optimal. The long-run effects suggest that it is preferable to finance additional 46 Research and Advisory Activities

public investment either through tax increases or through reductions in government consumption. The research on improved estimation methods for autoregressive models in finite samples was continued in cooperation with the University of Zurich. Building upon a median-unbiased estimator for first-order autoregressive models, which is well-known in the literature, several new estimators were proposed, e.g., an approximate mean-unbiased estimator. The estimators were calculated with the help of a saddlepoint approximation to the distribution of the ordinary least- squares estimator. This procedure is based on the assumption of normally dis- tributed disturbances and allows avoiding time-consuming simulation methods which would otherwise be necessary. A Monte Carlo study indicated that de- partures from normality do not affect the efficiency of the estimators. Moreover, the approximate mean-unbiased estimator turned out to be superior for persistent processes, independent of distributional assumptions and the inclusion of exogenous variables. A research project concerning the sources of the forecast errors made by economic research institutes in Germany was started. As two leading examples, the gross domestic product and inflation forecasts produced by the Kiel Institute for World Economics and the Council of Experts for the Evaluation of the Overall Economic Situation in Germany were analyzed. Some preliminary results indicate that the forecasts are unbiased and efficient in the framework of linear models. This implies that forecast errors are unpredictable and, thus, unavoid- able. However, first results from estimating a model of time-varying coefficients indicate that a fraction of the forecast errors is associated with the continuously decreasing growth rate of potential output. Given that this result can be con- firmed in the ongoing project, it could be useful for future forecasts. The Group also started a research project to analyze the relationship between income uncertainty and wealth for Chinese households in Jiangsu and Sichuan provinces. Founded on the buffer stock theory, which emphasizes the importance of precautionary saving, the Group specified several models which explain household wealth with variables like income uncertainty and permanent income. The estimation methods comprise both panel and pseudo panel techniques. Pseudo panels are constructed from a number of successive cross sections from which similar households are aggregated into one representative household. First results indicate that precautionary saving is in fact an important determinant of wealth creation. This implies that Chinese households protect themselves from temporary income shortfalls which therefore need not be balanced by the scarce resources of the Chinese government. Business Cycles 47

In a project on automating the quarterly estimates of labor supply in western and eastern Germany, the Group started to implement some institutional changes of the Bundesagentur für Arbeit, e.g., a new geographical partition according to which Berlin is now part of eastern Germany. Since corresponding demo- graphical and educational figures are not sufficiently available, the Group had to rely on own estimates, which impaired the quality of its short-term forecasts. Moreover, the implementation of the Hartz reforms has reduced both the international comparability and the information content of the unemployment statistics. In particular, the distinction between official and hidden unemployment, which has always been problematic, is becoming more and more arbitrary. Similar effects are expected to result from the expansion of the low-wage sector since April 2003; however, there are still no reliable data available on this.

German Business Cycle

The German Business Cycle Group (headed by Carsten-Patrick Meier) analyzes and forecasts the business cycle in Germany. The economic stagnation that started in the year 2000 continued in 2003. In the first half of the year, real GDP even declined somewhat, as a consequence of the uncertainties surrounding the Iraq conflict, the appreciation of the euro, and the stock market crash. However, beginning in the summer there were first signs of a recovery. The business climate improved and stock prices rose markedly for the first time since 2000. Industrial production and orders to manufacturing increased somewhat in early autumn. Still, the recovery is not for sure and it will, in any case, be rather modest. Dampening factors are the continuing effects of the appreciation of the euro and the weak cyclical situation in Germany’s main trading partner countries in the euro area, as well as economic policy. While income taxes will be lowered at the start of 2004, this tax reform will not be financed by cutting expenditures in a sufficient amount, so the public deficit will remain high. Against this background, a marked acceleration in consumption expenditure will not occur, as private households expect future tax increases. Important reform proposals have been made with Agenda 2010 and the report of the Rürup Commission. One research project conducted by the Group addressed the topic of deflation in Germany. Given the ongoing stagnation of the economy and falling prices in some months of 2002, this topic received a lot of attention at the start of 2003. In the research project, the Group examined deflation in Germany empirically. Using a small macroeconometric forecasting model, the Group estimated the probability of a fall in the price level. An innovation in the research was that it included the estimation of the complete probability distribution of the future inflation rate, not only the point forecast. The Group used a stochastic simulation 48 Research and Advisory Activities

technique, the nonparametric bootstrap. In contrast to approaches in the literature, the approach not only quantified the uncertainty stemming from the resid- uals of the model and from parameter estimation but also the uncertainty related to the model selection procedure. The procedure allows the probabilities of specified events to be estimated. In the research project, interest centered on the probability of a marked declineZdefined as a decline by more than one per- centZin the German consumer price index over several quarters which is not caused by a fall in oil prices. It was found that the probability of such an event was still very low. Given the signs of a cyclical recovery that appeared in the middle of the year, the probability was even lower. In another research project that the Group began in 2003, the Group attempted to model the monetary decisions of the Deutsche Bundesbank between 1973 and 1998, that is, in the period of its monetary autonomy. A problem with modeling past decisions is that historical macroeconomic data available in databanks today do not represent the information available to the policy-makers at that time because of data revisions. To solve this problem, “real-time” GDP data for Ger- many was constructed using old statistical publications of the Bundesbank. In addition, the methods used to estimate production potential and the output gap were adapted such that they only used data available at the historical date of the decision. It was found that the interest rate policy of the Bundesbank is well described by a standard Taylor rule, at least for some measures of the output gap. Monetary aggregates such as M3 also played a role for the Bundesbank’s decisions, but only to small extent. In a newly started research project, the Group deals with the price level convergence and persistent inflation differentials in the EMU member states. Em- pirical studies show that the major convergence took place at the beginning of the 1990s but that there are still large differences between the price levels of some countries. The goal is to develop a general equilibrium model to analyze price level convergence and also deviations from the law of one price. The Group especially plans to examine the effects of productivity shocks and government spending shocks on the variation of inflation across the euro area countries. The results will be used to assess the effects of the monetary policy of the ECB as well as national fiscal policies. The Group also plans to focus on the policy challenges facing accession countries, in particular monetary policy strategy after they have become members of the EU. Research on the labor market focused on analyzing the implemented portion of the proposals of the Hartz Commission. Labor market reforms were not able to brake the cyclical downturn in 2003, due to several reasons. Many reforms resulting from the proposals of the Hartz Commission were in the launching Business Cycles 49

phase in 2003. Especially, the personal service agencies, which have been installed since April, have been confronted with significant organizational problems. The “capital for work” (job floater) program, which is the only program that is intended to raise labor demand, was also not able to meet expectations. The only newly implemented instrument that has been well accepted is the business start-up program (Ich-AG). But due to the low demands on the business starters, a sustainable long-run effect is doubtful. To what extent the promotion of the low-wage sector will have a positive effect on the number of employees is difficult to estimate, since part of the increase in so-called Mini and Midi Jobs just results from a transmutation of still existing jobs. Moreover, the small jobs now enjoy tax privileges, again; consequently a possible increase in the number of jobs will not necessarily cause a corresponding increase in the number of new employees. Apart from this, crowding-out effects and windfall gains have to be considered. Consequently, in 2003 labor market reforms can hardly be expected to have a positive effect on employment.

International Business Cycle

The International Business Cycle Group (headed by Klaus-Jürgen Gern) analyzed business cycles in industrial countries other than Germany. In addition, current economic developments in a number of emerging market economies in Asia, Latin America, and Central and Eastern Europe were examined. The analyses showed that after the middle of 2003 there were signs that the world economy started to recover. Given the experience of 2002, when a phase of accelerating output growth proved to be only temporary, the Group discussed whether the latest improvement in the outlook can be regarded as the start of a sustained and strong upturn. It found that the preconditions for an upswing have improved compared to the previous year, particularly because corporations have made significant progress in consolidating their finances. There are, however, still a number of detrimental factors in place. As a result, capacity utilization is expected for the time being to rise at a moderate pace compared to previous upswings. As a result of the prolonged economic weakness, low core inflation, and de- clining stock prices, there was the concern that the United States and the euro area could follow Japan into a deflationary situation. Against this background, the Group discussed the phenomenon of deflation and its dangers. It was noted that first of all, a broad price index should be used to gauge the price tendency. A special problem of deflation is that it constrains the central bank in its capability to lower the real interest rate to an appropriate level due to the zero bound on nominal interest rates. Whether deflation is a serious risk from a macroeconomic 50 Research and Advisory Activities

perspective or not depends on its causes. In the case of a fall in the price level that is induced by positive supply shocks, profitability as well as wages and employment can continue to rise. By contrast, if deflation is the result of weakness in demand, real interest rates may stay too high due to the zero bound. A comparative analysis of developments in output and prices in Japan in 1990– 1993 and in the United States and the euro area in 1999–2002 showed some similarities but also notable differences. As concerns economic policy, an important conclusion was that monetary policy faced with a nontrivial risk of deflation in a situation of already low interest rates should be more expansive than would be suggested by standard monetary policy rules using central forecast numbers. Consequently, the level of key interest rates in the United States and in the euro area, which is significantly lower than suggested by the Taylor rule, was judged as being appropriate for the time being. A further topic was the analysis of economic developments in the euro area. In cooperation with other European research institutes, the Group continued to contribute to a project on a business cycle indicator for the euro area which allows a forecast of real GDP three quarters ahead. Further, the Group discussed the problem of how to determine the level of interest rates that is appropriate in order to support the economy without endangering the target of price level stability. An important point in this context was the estimation of the equilibrium real interest rate and the equilibrium level of output or the growth rate of the potential production, which play a central role in the literature. The analysis suggests that the equilibrium real interest rate may fluctuate even in the short term in response to real shocks that hit the economy. Specifically, the Group argued that the equilibrium real interest rate in the euro area in the spring of 2003 was relatively depressed in the face of increased oil prices and pessimistic expectations of households and firms. The analysis lent support to the decision of the ECB to push real short-term interest rates below their medium-term average. Finally, the analysis of fiscal policy in the euro area was geared towards the discussion on the Stability and Growth Pact. It was found that the problems in some countries regarding keeping the deficit in relation to GDP below the 3 percent limit do not result from the design of the pact but are due to insufficient con- solidation in previous years. It was argued that consolidating the budget would not necessarily dampen demand as expansive fiscal policies need not be ultimately stimulative. Empirical evidence for several countries does not show a significant negative correlation of the (structural) budget balance and the output gap. Hence, it was doubted that a Keynesian strategy of demand stimulation would be successful. On the eve of the EU enlargement, the macroeconomic aspects of EU accession from the perspective of the accession countries were investigated. In addition, a Business Cycles 51

study was done on how synchronized the business cycles are in the accession countries, the EU, and Germany. It was found that in recent years a close correlation of growth has developed, not least because of the fact that the process of economic integration has already gone very far. This is also the main reason accession can be expected to have only small effects on growth in the short term, although there will be significant gains in the longer run. In addition, the EU structural funds and cohesion funds will need some time to develop their full positive impact, and a stimulus from lower real interest rates will be felt only with the introduction of the euro. The risks of joining the euro zone as soon as possible are judged to be acceptable, and the accession countries are generally found to be relatively well positioned with respect to the Maastricht criteria. In a further research project, the Group investigated the international transmission of monetary impulses. In a first step the theoretical predictions of the traditional Mundell–Fleming model were compared with those of the Obstfeld– Rogoff model, which is based on microeconomics. Then, using a vector auto- regression model (VAR), the Group investigated whether two countries display symmetric or asymmetric reactions following an increase in interest rates in one country. To this end, two groups of countries were formed, the one containing countries with flexible exchange rates (Japan and Germany vis-à-vis the United States) and the other with fixed exchange rates (the Netherlands and Austria vis- à-vis Germany). The empirical results suggest shifting expenditures towards foreign products in reaction to exchange rate movements plays a minor role. Finally, a research project was started in order to analyze the mutual relationship between property prices and business cycles. Against the background of strong property price increases in a number of industrial countries in recent years, several questions are to be investigated: How does the property market influence the macroeconomy? When do we have a property price bubble? What is the probability that disequilibria lead to a crash in the market? What should economic policy do? In a first step, concepts such as “boom” and “bubble” were defined using arguments from the theoretical literature but also with a view towards their empirical application. The Group started applying the results to the situation in the United Kingdom.

Public Finance

The Public Finance Group (headed by Alfred Boss) continued its analysis of subsidization policy in Germany. The Group helped design a program for cutting subsidies which was published by the prime ministers of the states Hessia and North Rhine-Westphalia in September 2003. In addition, the extent and the structure of the subsidies granted by the federal government in the period 1998– 52 Research and Advisory Activities

2003 were analyzed. The results were compared to the data in an official government report released in October 2003. It turned out that this report contains only a minor portion of all subsidies granted. The Group also contributed to the discussion on tax harmonization in the EU. It is often proposed that capital income tax rates should be harmonized. Otherwise, due to high capital mobility a “race to the bottom” will occur and prevent governments from performing common tasks. However, there are only weak indi- cations for a “race to the bottom.” It is true that the corporate income tax rates have gone down in the industrial countries, but the corporate income tax revenues in relation to GDP have risen slightly on average. If tax competition were to increase as some observers seem to fear, this would not be disad- vantageous at all. Inefficiencies in the public sector and government expenditures would be reduced, and the tax burden would decrease. The danger of an undersupply of public goods is not a real one, so a harmful erosion of the welfare state is not to be expected. In cooperation with the University of Kiel, a simulation model for wage income tax revenues was developed. The gross wage income distributions for different groups of taxpayers in 1998 were used to derive wage income distributions for 2001–2006. By applying alternative rules of taxation, revenues were deduced for different tax rate structures. It was shown that the elasticity of wage income tax revenues with respect to wage income will go up if—according to the government’s intention—a new tax rate structure is introduced in 2004. Introducing new tax rates will reduce the average tax rates on average, but the marginal tax rates will on average decrease somewhat less. Thus, elasticity will increase. “Bracket creep” will remain a huge problem in Germany. Indexation of the tax rate structure should be considered as a solution to the problem. The Group also investigated whether the fiscal policy of the German states meets the criterion of sustainability. The Group’s assessment of the budgets of the 16 German states indicated that only Bavaria and Saxony were pursuing a fiscal policy which may be considered sustainable. The other states did not succeed in their attempt to stabilize public debt relative to GDP. The deviation from a sustainable situation is extremely large for Berlin, which has a “nonsustainability gap” of 6.4 percent of GDP in 2001. Bremen and Saarland are exceptional cases; there is no “nonsustainability gap” in these states in 2001, but this is due to financial aid provided by the federal government beginning in 1994. A specific analysis dealt with Berlin’s financial situation. Berlin’s budgetary revenues have been considerably high because of a co-alimentation from the

Cooperation with Researchers and Research Organizations 53

federal budget, both before and for some years after German reunification. This support has contributed to a lack of discipline on the expenditure side of the budget. A comparison with the budget of the city of Hamburg showed that Berlin’s expenditures for various purposes might have been much smaller in 2001 if expenditures per capita had been only as high as in Hamburg. Potential budgetary savings, as measured against the expenditures per capita in Hamburg, amount to nearly 6 billion euros, which roughly equals Berlin’s budget deficit. Finally, given the very modest GDP growth in Germany in 2001 and 2002, the Group investigated whether potential output will—as is expected—grow by 1.5 to 2.0 percent in the next years. The Group analyzed the incentives to work and to invest and the changes in these incentives in the recent years. Given the foreseeable changes in these incentives in the first half of the decade, the Group concluded that potential output might grow by only 1 percent or even less per year.

8. Interdepartmental Research

Work in some major research fields involves more than one department. The table on pages 54–55 shows which departments, and which members of staff, were involved in extensive interdepartmental research in particular major research fields. It does not reveal the complete range of research conducted at the Institute.

9. Cooperation with Researchers and Research Organizations

The Kiel Institute aims to intensify its exchange with economists from other countries and to improve upon its reputation as a center of international economic research. In order to intensify this exchange, the Kiel Institute relies on an international research network, which was established in 2001 and consists of renowned economists acting as International Research Fellows. They promote worldwide awareness of the Institute’s activities and research findings and stimulate further research by providing expert advice, participating

54 Research and Advisory Activities

Table: Interdepartmental Research

Major research field Dept. I Dept. II Dept. III

International trade Foders, Deke, Klepper, K. Schrader, Wiebelt Stehn Economic growth in Stolpe Klepper, Bode, Dohse the world economy Peterson, Wiebelt Labor markets Christensen Soltwedel Innovation and Klodt, Stolpe Deke Bode, Dohse technology New economy Kleinert, Klodt Laaser, Soltwedel International Foders, Klodt, Deke, Henke institutional Stehn arrangements Deepening and Dicke, Foders, Bickenbach, widening of European K. Schrader, Bode, Krieger- integration Stehn Boden, Kumkar, Laaser, J.-V. Schrader, Sichelschmidt, Soltwedel European Monetary Dicke Union Financial markets and Stolpe currencies

Regulation and Henke, Klepper Bickenbach, markets Kumkar, Laaser, J.-V. Schrader, Sichelschmidt, Soltwedel, Wolf Social security Glismann Lay Income distribution Lay, Wiebelt Cooperation with Researchers and Research Organizations 55

Dept. IV Dept. V President’s Dept./ Editorial Dept. Langhammer, Spinanger Kuhn

Gundlach

Spatz Schmidt, Oskamp Lehment Gundlach Benner Schertler

Gern, Scheide Mundhenke

Langhammer, Scheide Stolz Nunnenkamp, Spinanger

Schweickert, Vinhas de Borbély Buch Souza

Schweickert Carstensen, Gern, Kamps, Lehment, Pierdzioch Meier, Scheide Hammermann, Nunnen- Carstensen, Kamps, Buch, Lehment, kamp, Schweickert Kuhn, Meier, Scheide Pierdzioch, Schertler, Stolz Boss, Rosenschon, Mundhenke Sander

Thiele Boss, Gern, Rosenschon Spatz 56 Research and Advisory Activities

in joint projects, or holding seminars and lectures, and conducting research at the Institute. The network currently includes the following Research Fellows:

Alberto Alesina Hans Genberg Maurice Obstfeld David Audretsch David Greenaway Roberto Perotti Richard Baldwin Ricardo Hausmann Richard Pomfret Scott Barrett Geoffrey Heal James Riedel Geert Bekaert Elhanan Helpman Dani Rodrik Willem Buiter Dale Henderson Andrew Rose Ricardo Caballero Arye L. Hillman Gilles Saint-Paul Alan V. Deardoff Richard Layard André Sapir Paul De Grauwe Donald Lessard Richard Schmalensee Michael Dooley Richard M. Levich Dennis Snower Gunter Dufey Assar Lindbeck Guido Tabellini Bernard Dumas Karl-Göran Mäler Niels Thygesen Sebastian Edwards Catherine L. Mann Ingo Walter Barry Eichengreen Richard Marston Jeffrey G. Williamson Wilfred Ethier Bennett T. McCallum Holger C. Wolf Martin Feldstein Peter Neary Charles Wyplosz Jeffrey A. Frankel Damien J. Neven

In 2003, the Institute cooperated closely with the other major German economic research institutes, especially in preparing semiannually the Joint Report on the National and International Business Outlook (Gemeinschaftsdiagnose) and in preparing the Report on Economic Development in Eastern Germany, which are commissioned by the Federal Ministry of Economics and Labor and the Federal Ministry of Finance, respectively. Under the heading “European Business Cycle Analysis” the Institute cooperated with the CPB Netherlands Bureau for Eco- nomic Policy Analysis (The Hague), the Deutsches Institut für Wirtschaftsfor- schung (DIW, Berlin), the ETLA Research Institute of the Finnish Economy (Helsinki), the National Institute for Economic and Social Research (NIESR, London), the Observatoire Français des Conjonctures Économiques (OFCE, Paris), the Austrian Institute of Economic Research (WIFO, Vienna), and Prometeia (Bologna). Further, the Institute cooperated with the following national and international institutions: Z the Akademie für Technikfolgeabschätzung in Baden-Württemberg, Stutt- gart (G. Klepper, S. Peterson) Z Baruch College, The City University of New York (C.M. Buch) Z the BP-Amoco, Overijse, Belgium (G. Klepper, S. Peterson) Cooperation with Researchers and Research Organizations 57

Z the Bremer Energieinstitut, Bremen (G. Klepper, S. Peterson) Z the Bulgarian Academy of Sciences, Sofia (E. Bode, C. Krieger-Boden, R. Soltwedel) Z Cambridge Econometrics, Cambridge (G. Klepper, S. Peterson) Z the Center for Strategic and International Studies, Washington (P. Nunnen- kamp) Z the Centre d’Economie et d’Ethique pour l’Environnement et le Développe- ment (C3ED), Guyancourt (G. Klepper, S. Peterson) Z the Centre de Recerca en Economia Internacional of the University Pompeu Fabra (CREI), Barcelona (R.J. Langhammer, R. Schweickert), Z the Centre for Information and Network Economics (CINE) at the Seminar für Ökonometrie, Finanzökonometrie und Statistik of the Ludwig-Maxi- milians-Universität, Munich (K. Sailer) Z the Centre for International Climate and Environmental Research (CICERO), Oslo (G. Klepper, S. Peterson) Z the Centre International de Recherche sur l’Environnement et le Dévelop- pement (CIRED), Norgent sur Marne (G. Klepper, S. Peterson) Z the Centro de Estudios Económicos Tomillo (CEET), Madrid (G. Klepper, S. Peterson) Z the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City (P. Nunnenkamp) Z the Centrum für angewandte Politikforschung, Munich (J. Stehn) Z the Climate Network Europe (CNE), Brussels (G. Klepper, S. Peterson) Z the Consumer Unity and Trust Society (CUTS) in Jaipur, India (P. Nunnenkamp) Z C-SERGE Economics, University College London (G. Klepper, S. Peterson) Z the Department of Economics, Stockholm University (G. Klepper, S. Peterson) Z the Department of Economics, University of Bristol (L. Wößmann) Z the Deutsche Bundesbank, Frankfurt/M. (C.M. Buch, J. Scheide, S. Stolz, L. Vinhas de Souza) Z the Deutsches Institut für Internationale Pädagogische Forschung, Frank- furt/M. (L. Wößmann) Z the Economic and Social Research Institute (ESRI), Dublin (E. Bode, C. Krieger-Boden, R. Soltwedel) Z the Energiewirtschaftliches Institut der Universität zu Köln (ewi) (G. Klepper, S. Peterson) 58 Research and Advisory Activities

Z the Energy Research Centre of the Netherlands (ECN), Petten (G. Klepper, S. Peterson) Z the Environmental Institute, University College Dublin (G. Klepper, S. Peterson) Z the Europäische Akademie zur Erforschung von Folgen wissenschaftlich- technischer Entwicklungen, Bad Neuenahr-Ahrweiler (G. Klepper) Z the European Central Bank, Frankfurt/M. (L. Vinhas de Souza) Z the European Commission, Brussels (L. Vinhas de Souza) Z the Federal Reserve Bank, Chicago (C.M. Buch) Z the Federal Reserve Board, Washington (C.M. Buch) Z the Finance and Trade Policy Research Centre at Oxford University (M. Stolpe) Z the Fondazione Eni Enrico Mattei (FEEM), Venice (G. Klepper, S. Peterson) Z the Forschungszentrum Jülich (G. Klepper, S. Peterson) Z the Foundation for International Environmental Law and Development (FIELD), London (G. Klepper, S. Peterson) Z the Gesellschaft für Wirtschaftliche Strukturforschung (gws), Osnabrück (G. Klepper, S. Peterson) Z Hochschule Bremen (H. Wolf) Z Indiana University, Bloomington (D. Dohse) Z the Institut für Afrikastudien, Hamburg (J. Lay) Z the Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nuremberg (D. Dohse) Z the Institut für Energiewirtschaft und Rationelle Energieanwendung (IER), Universität Stuttgart (G. Klepper, S. Peterson) Z the Institut für Industriebetriebslehre und industrielle Produktion, Univer- sität Karlsruhe (G. Klepper, S. Peterson) Z the Institut für Mobilitätsforschung, Berlin (J. Stehn) Z the Institut für Systemtechnik und Innovationsforschung (ISI), Karlsruhe (G. Klepper, S. Peterson) Z the Institut für Umweltsystemforschung der Universität Osnabrück (G. Klepper, S. Peterson) Z the Institute for Environmental Studies, Free University of Amsterdam (IVM) (G. Klepper, S. Peterson) Cooperation with Researchers and Research Organizations 59

Z the Institute for International and Development Economics, Rotterdam (D. Spinanger) Z the Institute for New Technologies at the United Nations University in Maastricht (M. Stolpe) Z the Institute of South-East Asian Studies, Singapore (R.J. Langhammer) Z the Institute of World Economics in the Hungarian Academy of Sciences, Budapest (E. Bode, C. Krieger-Boden, R. Soltwedel) Z the Instituto de Investigaciones Socio-Económicas (IISEC), La Paz (J. Spatz, J. Lay, M. Wiebelt). Z the Inter-American Development Bank (IDB), Washington (R.J. Lang- hammer, R. Schweickert) Z the International Center for Economic Growth (ICEG), Budapest (L. Vinhas de Souza) Z the International Food Policy Research Institute, Washington (R. Thiele) Z the Internationale Weiterbildung und Entwicklung gGmbH (InWEnt), Berlin (P. Nunnenkamp) Z the Jawaharlal Nehru University, New Delhi (P. Nunnenkamp) Z the John F. Kennedy School of Government, Harvard University, Cam- bridge, Mass. (L. Wößmann) Z the Joint Research Centre, Instituto de Prospectiva Technologica (IPTS), Sevilla (G. Klepper, S. Peterson) Z the Lehrstuhl für Energiesysteme und Energiewirtschaft, Universität Bochum (G. Klepper, S. Peterson) Z the Lodz Institute for Forecasting and Economic Analyses (LIFEA), Lodz (G. Klepper, S. Peterson) Z Luigi Bocconi University, Milan (E. Bode, C. Krieger-Boden, R. Soltwedel) Z the Max-Planck-Institut für ausländisches öffentliches Recht und Völker- recht, Heidelberg (G. Klepper, O. Deke) Z the New Economic School, Moscow (L. Vinhas de Souza) Z the New York State School of Industrial and Labor Relations, Cornell Uni- versity, Ithaca, N.Y. (L. Wößmann) Z the Norwegian School of Management, Sandvika (C.M. Buch) Z the OECD, Paris (G. Klepper, S. Peterson) Z the Österreichisches Institut für Wirtschaftsforschung (WIFO), Vienna (G. Klepper, S. Peterson) 60 Research and Advisory Activities

Z the Potsdam Institut für Klimafolgenforschung, Potsdam (D. Deke, G. Klepper) Z Purdue University, West Lafayette, Indiana (D. Spinanger) Z the Research Centre for Education and the Labour Market (ROA), Maastricht University (L. Wößmann) Z the Robert Schuman Centre for Advanced Studies of the European University Institute (RSCAS), Florence (R.J. Langhammer, R. Schweickert) Z the Rome University La Sapienza, Rome (M. Stolpe) Z the Royal Institute for International Affairs, London (G. Klepper, S. Peterson) Z the Suntory and Toyota International Centre for Economics and Related Disciplines (STICERD), London School of Economics, London (K. Sailer) Z the Swiss Banking Institute, Universität Zürich (K. Carstensen) Z the UNEP Collaborating Centre on Energy and Environment, Risø National Laboratory, Roskilde (G. Klepper, S. Peterson) Z the Unidad de Análisis de Políticas Sociales y Económicas (UDAPE), La Paz (J. Lay, M. Wiebelt) Z the University of Bangor, Wales (M. Stolpe) Z the University of Cologne, Wirtschafts- und Sozialwissenschaftliche Fakul- tät (F. Foders, C.-P. Meier) Z the University of Dortmund (C.-F. Laaser, R. Soltwedel) Z the University of Kiel, Technische Fakultät and Mathematisch-Naturwissen- schaftliche Fakultät (F. Foders) Z the University of Leipzig, Abteilung für Afrikastudien (J. Lay) Z the University of Thessaly, Trikala, Greece (E. Bode, C. Krieger-Boden, R. Soltwedel) Z the University of Warwick, Coventry (M. Stolpe) Z the Wissenschaftliche Hochschule für Unternehmensführung WHU – Otto Beisheim Hochschule, Koblenz (F. Foders) Z the Wuppertal Institut für Klima, Umwelt, Energie, Wuppertal (G. Klepper, S. Peterson) Z the Zentrum für Europäische Integrationsforschung (ZEI), Bonn (E. Bode, C. Krieger-Boden, R. Soltwedel) Z the Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim (D. Dohse, G. Klepper, S. Peterson) Advisory Activities and Participation in Organizations 61

Further, the Institute cooperates on a regular basis with the following associations, of which it is a member:

Z Association of German Economic Research Institutes (ARGE) Z Association d’Instituts Européens de Conjoncture Économique (AIECE) Z Deutsches Forschungsnetz Z Deutscher Bibliotheksverband (DBV). Frequently, several members of the research staff are working as Kiel Institute Fellows at the National Bureau of Economic Research (NBER) in Cambridge, Mass.

10. Advisory Activities and Participation in Organizations

In 2003, numerous economists from the Institute were active in an advisory capacity in national and international groups and organizations:

Eckhardt Bode advised the Committee of Economics and Labor of the German Bundestag on issues pertaining to the Crafts Code. Alfred Boss was a member of the Committee for Tax Assessment at the Federal Ministry of Finance in Berlin. He advised the Finance Committee of the German Bundestag on two tax proposals (Steuervergünstigungsabbaugesetz, Gesetz zur Förderung der Steuerehrlichkeit). With representatives of the ministries of finance of Hesse and North Rhine-Westphalia, he discussed strategies for reducing subsidies. Further, he discussed issues pertaining to budget policy and reducing subsidies with managers of the Friedrich-Ebert-Stiftung and with the Bund der Steuerzahler. Hugo Dicke was consulted as an expert by the 1st Committe of Enquiry of the German Bundestag (15th electoral term) and by the Europe Committee in the Schleswig-Holstein Landtag on issues pertaining to Turkey’s request to accede the EU. Herbert Giersch was a member of the Advisory Council of Economists attached to the Federal Ministry of Economics and Labor. Erich Gundlach was a member of the Editorial Board of the journal “Applied Economics Quarterly.” Gernot Klepper was appointed a member of the National Committee on Global Change Research of the Federal Ministry of Education and Research and the DFG, Germany’s major research funding agency. He was a member of the 62 Research and Advisory Activities

Kollegium der Europäischen Akademie zur Erforschung von Folgen wissenschaftlich-technischer Entwicklungen in Bad Neuenahr/Ahrweiler. He was consulted as an expert by the Federal Ministry of Education and Research. Rolf J. Langhammer was a member of the Advisory Council of Economists attached to the Federal Ministry of Economic Cooperation and Development, a member of the Advisory Council of the Deutsches Übersee-Institut in Hamburg, and a member of the Editorial Boards of the “ASEAN Economic Bulletin” and the “Journal of the Asia Pacific Economy.” Moreover, he was a member of the Expertenkommission der Bertelsmann-Stiftung zur Erarbeitung eines Rankings für Entwicklungs- und Transformationsprozesse. Peter Nunnenkamp was a member of the Advisory Council of the periodical entitled “Lateinamerika Analysen.” He was a member of the Global Issues Working Group of the Federal Foreign Office and a member of the Steering Committee of the EU-India Network on Trade and Development. Further, he was consulted as an expert by the Volkswagen Stiftung and he advised UNCTAD in its preparatory work for the World Investment Report 2003. Moreover, he was consulted as an expert by the University of Wisconsin-Milwaukee in appointing an associate professor. Joachim Scheide was consulted as an expert in the 1st Committee of Enquiry of the German Bundestag (15th electoral term) and by the Council of Experts for the Evaluation of the Overall Economic Situation in Germany. He advised the Ministry of Finance and Energy of the State of Schleswig-Holstein on issues pertaining to the business cycle and the interest rates. Further, he advised the Danish Council of Economic Advisors, the Danish Central Bank, and the Irish Gov- ernment. Moreover, he was a member of the Advisory Board of the Blekinge Institute of Technology, Sweden. Jörg-Volker Schrader advised the FDP in the Schleswig-Holstein Landtag on agricultural policy issues. Hartmut Schröder was a board member of the IT-Anwenderkreis Norddeutsch- land. Furthermore, he was deputy chairman of the IT-Arbeitskreis der Leibniz- Gemeinschaft and a member of the Technical Infrastructure Working Group in the Gemeinsamer Bibliotheksverbund (GBV). Horst Siebert was a member of the Group of Economic Analysis of the European Commission, which is directly attached to Romano Prodi, president of the European Commission. He was a member of the Council of Experts for the Evaluation of the Overall Economic Situation in Germany (December 1990February 2003) and a member of the Advisory Council of Economists attached to the Federal Ministry of Economics and Labor. He was a member of the Academia Scientarium et Artium Europeae in Salzburg, the Joachim Jungius- Advisory Activities and Participation in Organizations 63

Gesellschaft, and the Board of Directors of the Asia Pacific Society. He was also a board member of the Aspen Institute Italia and a member of the Scientific Committee of the Institute for Studies and Economic Analyses in Rome. Moreover, he was a member of the committee of the Fritz Thyssen Stiftung, of the committee of the Deutsches Museum in Munich, and of the jury which awarded the Postbank Finance Awards 2003/2004. Further, he was a member of the Editorial Boards of the “Journal of Policy Reform,” “Environmental and Resource Economics,” and the “International Yearbook of Environmental and Resource Economics: A Survey of Current Issues,” and the Editorial Advisory Boards of the “Zeitschrift für Umweltpolitik und Umweltrecht” and “Per- spektiven der Wirtschaftspolitik,” the latter published by the Verein für Socialpolitik. He was also a member of the Advisory Boards of “Macroecono- mics and Monetary Economics Abstracts” of the Social Science Electronic Publishing, Inc. (SSEP), USA, and of “International Finance,” “European Eco- nomics Abstracts,” and “Macroeconomic Abstracts.” Julius Spatz was a member of the Editorial Board of the newly founded journal “Revista Latino Americana de Desarrollo Económico.” He advised the Federal Ministry for Economic Cooperation and Development (BMZ) and the Deutsche Gesellschaft für technische Zusammenarbeit (GTZ) on the strategies on development cooperation in Honduras. Dean Spinanger was a member of the Academic Council of the Centre Français d’Études et de Recherches sur les Zones de Liberté Économique and the Board of Directors of the Institute of International Economics in Rotterdam. He advised various Hong Kong public authorities in matters of trade. He also advised the World Bank concerning trade in textiles and clothing, relating to WTO trade negotiations, and Purdue University in West Lafayette, Indiana, regarding the Global Trade Analysis Project (GTAP), about the effects of nontariff trade barriers. In addition, he advised the German Bundestag regarding the impact and importance of liberalizing the service sector. He advised the Asia-Pacific Economic Cooperation (APEC) on issues dealing with nontariff barriers, the Heritage Foundation as a Public Policy Expert, and the EU and UNCTAD in matters dealing with barriers to trade in the textile and clothing sector, the implications of China’s accession to the WTO, and the impact of eliminating quotas on textile and clothing imports. Jürgen Stehn advised the Landesregierung Schleswig-Holstein (state government) in his capacity as a member of a working group set up by the Ministry of Economics, Technology, and Transportation to recommend ways and means of simplifying official economic statistics. Moreover, he advised the Institut für Mobilitätsforschung, Berlin, on issues of structural change in Germany and Europe. He was consulted as an expert by the Federal Ministry of Economics and 64 Research and Advisory Activities

Labor on a project dealing with the modernization of the German economy and its implications for employment. Horst Thomsen was a member of the Advisory Board of Wissenschaftliche Biblio- theken attached to the Schleswig-Holstein Ministry of Education, Science, Research, and Cultural Affairs and a member of the Verbundleitung des Gemein- samen Bibliotheksverbundes (GBV). He was one of the spokespersons of the Arbeitskreis Bibliotheken und Informationseinrichtungen der Wissenschaftsge- meinschaft Gottfried Wilhelm Leibniz (WGL). Moreover, he was the spokesman of the Arbeitsgemeinschaft Zentrale Fachbibliotheken. Lúcio Vinhas de Souza was an elected board member of the University Association of Contemporary European Studies (UACES) for the period 20032006. He was designated an external Advisor of the European Policy Network (EPN). Moreover, he was consulted as an expert for projects that were submitted to CERGE-EI, Charles-University in Prague, and to GDN (Global Development Network)/World Bank. Further, he collaborated on the Global Trade Analysis Project data base and was a member of a dissertation committee at the Charles-University in Prague. Manfred Wiebelt was a member of the Editorial Board of the newly founded journal “Revista Latino Americana de Desarrollo Económico.” He advised the Unidad de Análisis de Políticas Sociales y Económicas in La Paz on its consultation with the IMF on the poverty reduction strategy.

11. Commissioned Expert Reports and Research Projects

Research Projects and Reports Completed in 2003

Gemeinschaftsdiagnose der führenden deutschen Wirtschaftsforschungsinstitute im Frühjahr 2003 [Joint Report of the Major German Economic Institutes on the National and International Business Outlook in Spring 2003] J. BENNER, D. BORBÉLY, A. BOSS, K.-J. GERN, C. KAMPS, A. KUHN, F. OSKAMP, C.-P. MEIER, J. SCHEIDE, R. SCHMIDT, commissioned by the Bundesministerium für Wirtschaft und Arbeit, together with the DIW, HWWA, ifo, IWH, RWI Gemeinschaftsdiagnose der führenden deutschen Wirtschaftsforschungsinstitute im Herbst 2003 [Joint Report of the Major German Economic Institutes on the National and International Business Outlook in Autumn 2003] Commissioned Expert Reports and Research Projects 65

J. BENNER, D. BORBÉLY, A. BOSS, K.-J. GERN, C. KAMPS, A. KUHN, F. OSKAMP, C.-P. MEIER, J. SCHEIDE, R. SCHMIDT, commissioned by the Bundesministerium für Wirtschaft und Arbeit, together with the DIW, HWWA, ifo, IWH, RWI Wege zur Beurteilung und Beseitigung von Infrastrukturengpässen im Luft- verkehr [Ways of Evaluating and Removing Bottlenecks in Air Transport Infra- structure] F. BICKENBACH, L. KUMKAR, H. SICHELSCHMIDT, R. SOLTWEDEL, H. WOLF, commissioned by the Deutsche Lufthansa Berlin-Stiftung Fortschrittsbericht wirtschaftswissenschaftlicher Institute über die wirtschaftliche Entwicklung in Ostdeutschland [Report of German Economic Institutes on Eco- nomic Development in Eastern Germany] E. BODE, D. DOHSE, C.-F. LAASER, H. SICHELSCHMIDT, R. SOLTWEDEL, commissioned by the Bundesministerium der Finanzen, together with the DIW, IAB, IWH, ZEW Nutzung und Schutz genetischer Ressourcen—Strategien zur Bewahrung biologischer Vielfalt [Using and Protecting Genetic Resources—Strategies for Preserving Biological Diversity] O. DEKE, G. KLEPPER, commissioned by the Bundesministerium für Bil- dung und Forschung, together with the Max-Planck-Institut für ausländi- sches öffentliches Recht und Völkerrecht in Heidelberg and the Potsdam Institut für Klimafolgenforschung (PIK) Raumwirtschaftliche Implikationen der New Economy—Zur Bedeutung von E-commerce und E-business [Regional Economic Implications of the New Economy—On the Importance of E-Commerce and E-Business] D. DOHSE, C.-F. LAASER, J.-V. SCHRADER, R. SOLTWEDEL, commissioned by the Wüstenrot Stiftung Family Background, Schooling Resources, and Institutional Features: What Determines Student Performance in East Asian Countries? E. GUNDLACH, L. WÖSSMANN, commissioned by The International Centre for the Study of East Asian Development (ICSEAD) Concerted Action on Tradeable Permits (CATEP) G. KLEPPER, S. PETERSON, commissioned by the Europäische Kommission, together with the National University of Ireland; The Royal Institute for International Affairs, Instituto de Prospectiva Technologica (IPTS), Centre International de Recherche sur l’Environnement et le Développement (CIRED), Stockholm University, Fondazione Eni Enrico Mattei (FEEM), 66 Research and Advisory Activities

Centre for International Climate and Environmental Research (CICERO), Foundation for International Environmental Law and Development (FIELD), UNEP Collaborating Centre on Energy and Environment, OECD, Climate Network Europe (CNE), and BP-Amoco Identifikation der Auswirkungen einer Verteuerung von Verkehrsleistungen durch gesamtwirtschaftlich motivierte Mobilitätsabgaben auf die räumlichen Produktions-, Warendistributions- und Siedlungsstrukturen [Identifying the Ef- fects on Production, Distribution, and Settlement Structure of an Increase in Generally Imposed Surcharges and Taxes on Transport Services] L. KUMKAR, C.-F. LAASER, H. SICHELSCHMIDT, R. SOLTWEDEL, H. WOLF, commissioned by the Bundesministerium für Verkehr, Bau- und Woh- nungswesen Armutsauswirkungen von makroökonomischen Strukturreformen—Wissen- schaftliche Begleitung von Stabilisierungs- und Strukturanpassungsprogrammen am Beispiel Boliviens [Effects of Macroeconomic Structural Reforms on Poverty—Economic Advice on Stabilization and Structural Adjustment Programs in the Case of Bolivia] R.J. LANGHAMMER, D. PIAZOLO, R. SCHWEICKERT, R. THIELE, M. WIEBELT, commissioned by the Kreditanstalt für Wiederaufbau (KfW) The Missing Links—Uganda’s Economic Reforms and Pro-Poor Growth J. LAY, commissioned by the Universität Leipzig What Opportunities and Risks Can Developing Countries Expect from GATS- Induced Liberalization of International Trade in Services? M. LÜCKE, D. SPINANGER, commissioned by the Deutsches Institut für Ent- wicklungspolitik (DIE) Magellan Project: The Political Economy of Beef Liberalization in Germany J.-V. SCHRADER, commissioned by the Centre for International Economics in Canberra

Research Projects and Reports Currently Being Prepared

Gemeinschaftsdiagnose der führenden deutschen Wirtschaftsforschungsinstitute [Joint Report of the Major German Economic Institutes on the National and International Business Outlook] J. BENNER, A. BOSS, K.-J. GERN, C. KAMPS, A. KUHN, C.-P. MEIER, F. OSKAMP, J. SCHEIDE, R. SCHMIDT, commissioned by the Bundesministe- rium der Finanzen, together with the DIW, HWWA, ifo, IWH, RWI Commissioned Expert Reports and Research Projects 67

The Impact of European Integration and Enlargement on Regional Structural Change and Cohesion (EURECO) E. BODE, C. KRIEGER-BODEN, R. SOLTWEDEL, commissioned by the 5. Rahmenprogramm der EU-Forschungsförderung, together with the Zen- trum für Europäische Integrationsforschung (ZEI), Bonn; Luigi Bocconi University, Milan; Economic and Social Research Institute (ESRI), Dublin; University of Thessaly, Trikala, Greece; Institute of World Economics in the Hungarian Academy of Sciences, Budapest; Bulgarian Academy of Sciences, Sofia Volatility in the Global Economy: The Role of Financial Markets C.M. BUCH, C.P. PIERDZIOCH, S. YENER, commissioned by the Fritz- Thyssen-Stiftung What Determines the Risk Effects of International Bank Mergers? C.M. BUCH, G. DELONG, commissioned by the Alexander von Humboldt- Stiftung Wirtschaftliches Potential von Kennzeichen für Verbraucher- und Umwelt- schutzzwecke [Economic Potential of Labels for Consumer Protection and Environmental Protection] G. KLEPPER, J.M. HENKE, commissioned by the Bundesministerium für Wirtschaft und Arbeit Transition to Sustainable Economic Structures (TranSust) G. KLEPPER, S. PETERSON, commissioned by the European Commission, together with 10 other universities and research institutes in 8 European countries Modellexperiment IV: Längerfristiger Beitrag der deutschen Energiewirtschaft zum europäischen Klimaschutz [Modeling Experiment IV: Long-Term Con- tribution of the German Energy Industry to EU Climate Policy] G. KLEPPER, S. PETERSON, commissioned by the Bundesministerium für Wirtschaft und Arbeit im Rahmen des Forums für Energiemodelle und Energiewirtschaftliche Systemanalysen (FEES), together with 12 other German universities and research institutes Open Source Software im Wettbewerb [Open Source Software and Competition] H. KLODT, J. MUNDHENKE, commissioned by the Bundesministerium für Wirtschaft und Arbeit Verteilungseffekte von Steuerungsinstrumenten zur Krisenbewältigung in Ent- wicklungsländern: Konzeptionelle Fundierung und Fallanalyse der Strukturan- passung in Bolivien [Distribution Effects of Instruments Used to Overcome 68 Research and Advisory Activities

Crises in Developing Countries: Underpinning and Analyzing Structural Adjust- ment in Bolivia] P. NUNNENKAMP, J. SPATZ, commissioned by the Volkswagen Stiftung EUROFRAME Indicator J. SCHEIDE, together with several other European economic research institutes European Financial Markets, Venture Capital and High-Tech Firms A. SCHERTLER, M. STOLPE, commissioned by the European Commission, together with the United Nations University in Maastricht, the Oxford University, the University of Warwick, and the Rome University La Sapienza Makroökonomische Stabilisierung und Wachstum in Schwellenländern [Macro- economic Stabilization and Growth in Emerging Countries] R. SCHWEICKERT, R. THIELE, commissioned by the Bundesministerium der Finanzen Post Transition Macro Questions L. VINHAS DE SOUZA, together with the New Economic School (NES) in Moscow and the International Center for Economic Growth (ICEG) in Budapest Bildungsinstitutionen und Schülerleistungen [Educational Institutions and Student Performance] L. WÖSSMANN, E. GUNDLACH, together with the DIPF in Frankfurt/Main, Cornell University in Ithaca, N.Y., and the ifo in Munich

B Further Research Projects

BENNER, J., The Role of Sentiment Indicators for Business Cycle Forecasting.

BENNER, J., Inflation Differentials in a Currency Union.

BICKENBACH, F., The Allocation of Competences for the Regulation of Europe’s Network Industries.

BODE, E., Productivity Effects of Agglomeration Externalities.

BODE, E., Liberalization of Crafts Markets in Germany.

CARSTENSEN, K., Analyzing the Stability of Money Demand in the Euro Area. Commissioned Expert Reports and Research Projects 69

CARSTENSEN, K., Improved Point Estimation in the First-Order Autoregressive Model with Regressors.

CARSTENSEN, K., Precautionary Saving in China.

CHRISTENSEN, B., Reservation Wages and Unemployment in Germany.

DICKE, H., The EU Accession Agreement—Taking Stock.

DICKE, H., Limits to the Economic Activities of Local and Regional Authorities in the European Common Market.

DOHSE, D., Agglomeration and Corporate Growth.

FODERS, F., International Factor Mobility.

GERN, K.-J., Macroeconomic Policy Issues of EU Enlargement.

GERN, K.-J., Deflationary Processes in the World Economy.

HAMMERMANN, F., Monetary Policy in Newly Industrializing Countries under a Regime of Flexible Exchange Rates.

HENKE, J.M., Information Disclosure as an Environmental Policy Instrument.

KLEINERT, J., Globalization of the German Industry.

KLEPPER, G., Climate Policy.

KLODT, H., Structural Change and Industrial Policy.

KRIEGER-BODEN, C., European Integration and the Case for Compensatory Regional Policy.

KUHN, A., Deflation in Japan.

LAASER, C.-F., Patterns of Economic Integration in the Course of the EU’s Eastern Enlargement.

LANGHAMMER, R.J., Trade Liberalization in Services.

LÜCKE, M., Economic Recovery, Migrant Earnings, and International Trade Re- orientation in Moldova.

MEIER, C.-P., The Role of Sentiment Indicators for Business Cycle Forecasting.

MEIER, C.-P., Stochastic Simulation Techniques for the Estimation of Forecast Intervals.

MEIER, C.-P., Examination of Methods for Forecasting Real GDP on the Basis of Real-Time Data. 70 Research and Advisory Activities

MUNDHENKE, J., Open Source Software—Economic Models.

NUNNENKAMP, P., Determinants and Effects of Foreign Direct Investment in Developing Countries.

NUNNENKAMP, P., Economic Policy, Institutional Development, and Income Growth in Arab Countries.

PETERSON, S., International and European Emissions Trading.

PIERDZIOCH, C., Financial Market Integration and Macroeconomic Volatility.

ROSENSCHON, A., Structural Analysis and Assessment of Subsidies in Germany.

SANDER, B., Real Estate Prices and the Business Cycle.

SCHMIDT, R., Updating and Automating the Quarterly Estimates of Potential Labour Supply in Eastern and Western Germany.

SCHMIDT, R., Updating and Forecasting the Monthly Raw Materials Price Index on a Euro Basis for German Goods Imports.

SCHRADER, K., Intraindustry Trade and Structural Change.

SCHRADER, K., Trade Integration and European Enlargement.

SCHWEICKERT, R., Real Exchange Rate and Macroeconomic Equilibrium in Emerging and Developing Market Economies.

SCHWEICKERT, R., Regional Monetary Integration.

SICHELSCHMIDT, H., Infrastructure Policy of the European Union.

SIEBERT, H., Structural Problems in the German Economy.

SPATZ, J., Determinants and Effects of Foreign Direct Investment in Developing Countries.

SPATZ, J., Determinants of Business Cycles in Small, Computable General Equi- librium Models.

STEHN, J., Intraindustry Trade and Structural Adjustment.

STOLPE, M., Technological Change in Health Care.

STOLZ, S., Capital Regulation and the Behavior of Banks.

THIELE, R., Structural Adjustment and Income Distribution in Low-Income Countries. Commissioned Expert Reports and Research Projects 71

VINHAS DE SOUZA, L., A Primer on Budgetary Questions on the New EU Members States.

VINHAS DE SOUZA, L., Financial Liberalization and Business Cycles: The Experience of the Future EU Member States in the Baltics and Central Eastern Europe.

WIEBELT, M., Sustainable Development.

WIEBELT, M., Income Distribution and Poverty.

III. Documentation Services

1. The Library

The German National Library of Economics (Deutsche Zentralbibliothek für Wirtschaftswissenschaften, ZBW), directed by Horst Thomsen, is the largest library for economics in Germany and the largest special library for economics in the world. The Library is responsible for classifying and indexing economic publications from all over the world and making them available to its local, national, and international users. In addition, it indexes articles from journals and collected works. Its holdings consist mainly of publications related to the fields of world economics and national economics, including a large collection of electronic media. Moreover, the Library offers a number of information and research services. The Library is assisted in providing its services by an advisory board (Fach- beirat), which consists of the following experts: Dr. Klaus Franken, Director of the University Library of Constance (chairman) Dr. Elisabeth Niggemann, General Director of the Deutsche Bibliothek Reinhard Rutz, Deutsche Forschungsgemeinschaft Professor Dr. Wolf Schäfer, Helmut Schmidt University—University of the Bundeswehr, Hamburg

B Holdings and Information Services

By the end of 2003, the library had increased its holdings to over 2.7 million bound volumes, which are stored on more than 49 kilometers of shelving. Around 40,000 bibliographical volumes and 25,000 monographs were acquired. Nearly 17,000 periodicals (magazines, annuals, and journals) are acquired on a regular basis, 25 percent of these publications are electronic documents. The Library’s holdings are cataloged in the GBV Common Library Network (Gemeinsamer Bibliotheksverbund, GBV) for the online database ECONIS and for the GBV databases: Union Catalogue of the Common Library Network (Ge- meinsamer Verbundkatalog, GVK), GVK Plus, which is the GVK including On- line Contents, and Online Ressourcen (OLR). The Library 73

About 80,000 new titles were added to the ECONIS databank, bringing its holdings to over 1.2 million references. There are now 40,000 links to Internet publications in the databank. A retroconversion project was launched to catalog all card catalog holdings of the Library (to 1986) in the database of the GBV Common Library Network. When it is finished, the complete holdings of the Library will be available in the database. The WISO II CD-ROM now has 1.22 million titles from the ECONIS databank. The titles can also be found in the online databank WISOnet WIWI, which was created by the German Business Information (GBI). WISOnet WIWI is a collection of databanks that include 1.7 million literature references and is the largest databank for economics in Germany. The online version WISOnet Plus, which allows linking to digitalized full texts from the project EconDoc, is new. Users can take advantage of the Library’s full-text connection to 3,800 electronic economic journals by accessing the Electronic Journals Library (Elektronische Zeitschriftenbibliothek, EZB). This library is a national service of the University of Regensburg. With databases such as Business Source Premier, from the publishing house EBSCO, and JSTOR, the Library offers users additional full- text access to articles in economic journals. Full texts of working papers in economics are available through the document server ZBW OPUS.

B Other Services

Included in this year’s Internet ECONIS Select bibliography series are 60 topics, such as Rentenreform in Deutschland, Deregulierung der Elektrizitätswirtschaft in den USA and Embargos aus ökonomischer Sicht. The Library catalogs articles from 1,500 journals for ECONIS, the list of which can be found on the homepage of the Library. Monthly lists of new acquisitions of the Library are published there too. The Library continued to increase the large number of works that it provided through the electronic document delivery service. The Library supplies journal articles and monographs for the subito and GBVdirect services and takes part in the electronic interlibrary loan system of the GBV.

B Public Relations

The Library again participated in industrial/organizational fairs in 2003. At most of these fairs the Library shared a stand with the three German national libraries. 74 Documentation Services

The Library also participated in the 69th Annual General Conference and Council of the International Federation of Library Associations (IFLA) in Berlin. Information about projects concerning the information supply in the digital area was the main theme at all the presentations.

B Cooperation and Projects

In the context of national information and literature supply service in economics, the Library cooperated closely with the Universitäts- und Stadtbibliothek Köln (USB Cologne) and the HWWA Institute in Hamburg as well as with two other German central libraries: the German National Library of Science and Tech- nology/University Library Hannover (TIB/UB) and the German National Library for Medicine (ZBMed). One of the most important cooperative services is the DFG project Virtual Library for Economics—EconBiz in which the USB Cologne and the Library participate. The funding for the project has been extended by the DFG to 2005. The gateway for economics on the Internet is continually being enlarged. The main part of the project is a subject area guide for Internet sources that are chosen and continually updated according to their usefulness in the field of economics. This guide is being prepared by the project partners, USB Cologne, HWWA, the Library, and a number of other cooperative partners. In EconDoc, a program sponsored by the German Federal Ministry of Education and Research, the Library, the HWWA, the ifo Institute for Economic Research, and the GBI have made almost 200 German language economic journals available on the Internet. There are now over 640,000 full-text journal articles available. In addition, the Library offers direct links to journals through the ECONIS databank. EconBiz and EconDoc will be integrated as gateway to economic information into vascoda, the interdisciplinary Internet gateway for scientific information in Germany. A European gateway for economics is to be developed through the project NEREUS (Networked Economic Resources for European Scholars). The Library’s partners in the project are the libraries of the London School of Economics and Political Science, the Université Libre de Bruxelles, the Universiteit van Tilburg, the Universitat Autònoma de Barcelona, and the European University Institute in Florence. The Library will digitalize all issues of five leading journals in economics for the SSG-Zeitschriftendigitalisierung project. The goal of this cooperative project is The Economic Archives 75

to digitalize, retrospectively, state-of-the-art journals found in the collections of nine major German special libraries. The demonstration server DigiZeitschriften already offers access to many volumes of these journals. A possibility for document delivery of licensed electronic journals was established by the Pilot Program for the Promotion of Retrieval of Electronic Journals (Pilot- programm zur Förderung der Bereitstellung elektronischer Zeitschriften). The Deutsche Bibliothek is the coordinator of a project that will implement a crosswalk between the Standard Thesaurus Economics and the economics part of the national authority files for subject headings, entitled “Crosskonkordanz STW-SWD—Entwicklung und Implementierung eines Crosswalks zwischen dem Standard Thesaurus Wirtschaft (STW) und dem Bereich Wirtschaft der Schlag- wortnormdatei (SWD) zur Steigerung der Effektivität des Retrievals in den Wirt- schaftswissenschaften.” Partners in this project are the Library, the HWWA, the USB in Cologne, and the GBV Common Library Network. An automatic duplicate check of the headings was completed. The results are now to be analyzed. The DFG has provided funds for this project until the middle of 2004. The ever-increasing amount of electronic full texts available on the Internet is an inducement to develop an automatic indexing program for cataloging content. The AutIndex project is a cooperation between the HWWA and the Society for the Advancement of Information Research at the University of Saarland (IAI) that will use subject headings from the Standard Thesaurus Economics to automatically search for information in full-text Internet journals.

2. The Economic Archives

Since November 2001, the Economic Archives (headed by Bernhard Klein) and the press articles documentation center of the HWWA Institute in Hamburg have provided the reference database ECONPRESS. Both institutes select reports from about 100 newspapers and journals, published in various countries all over the world. Articles are classified using a system based on the classification index of the institutes’ libraries, covering all countries in the world and about 700 sub- jects. The classification and other information on the articles, e.g., name of author, institution, enterprise or key words, are added to the bibliographical data. Thus, a database is provided which allows online research on the Internet, at http://www.hwwa.de:81/, and which will help anyone interested in economic problems to find useful and current reports from newspapers and journals.

76 Documentation Services

The articles cover 29 topics: economics banking crafts money, financial markets insurance services international economics real estate trade public finance public services (incl. transport labor armed forces) information and business administration nonprofit organizations communication agriculture (incl. forestry education nature, environment and fishery) health, medicine law energy and water social welfare politics commodities culture society industry science, research

In addition, there are special collections on persons, institutions, and enterprises. The Economic Archives are a public institution and are thus open to the general public. Its 14 million clippings, covering the years 1920–2000, are made available as paper copies or on microfilm. Articles after January 1, 2001, are no longer available in Kiel; they are now available at the press articles documentation center of the HWWA Institute in Hamburg. Since summer 2003, parts of ECONPRESS have been used by GBI, a company providing business information. GBI offers articles from 30 ECONPRESS sources. They are linked with other data and can be searched for via a database called FITT ECONPRESS. Unlike ECONPRESS, this database allows the full text to be displayed for a fee. In addition, it is now possible to obtain a collection of reference data in ECONPRESS (at no charge) and to find the full text in GBI, which is almost directly linked to our database. Another step forward in developing ECONPRESS concerns copyright rules. The Economic Archives are authorized by the law in force now to send articles by e- mail. The royalty for this service is quite low. The users of ECONPRESS will now receive current information faster than before and at lower cost than with other press article databases.

IV. Teaching and Lecturing

1. Universities and Colleges

In 2003, several staff members at the Institute were once again active in teaching and lecturing at universities and colleges. Horst Siebert held lectures and seminars at the University of Kiel (until March 2003, as Professor of Theoretical Economics). The following staff members also held regular lectures, seminars, or exercises at the same university: Claudia M. Buch, Federico Foders, Jörn Kleinert, Rolf J. Langhammer, Harmen Lehment, Christian Pierdzioch, Joachim Scheide, Michael Stolpe, and Stéphanie Stolz. Federico Foders held lectures at the University of Cologne, Erich Gundlach taught at Helmut Schmidt University—University of the Bundeswehr in Ham- burg and at the University Gießen, and Oliver Lorz taught at the Rheinisch- Westfälische Technische Hochschule in Aachen and at the University of Constance. Bernhard Klein, Paul J. Kramer, and Manfred Salden taught at the Fachhoch- schule Kiel; Claudia M. Buch and Andrea Schertler taught at Multimedia Campus, Kiel.

2. Advanced Studies Program

The Advanced Studies Program in International Economic Policy Research, the postgraduate program offered by the Institute, was established in 1984. This ten- month program, conducted fully in English, is designed for young economists coming straight from university as well as for economists with several years of professional experience who are interested in learning about the current issues in research in international economics. As a rule, there are 8–10 one- or two-week courses in various fields in international economics which are taught by renowned professors from all over the world. The courses are supplemented by a number of one- or two-day seminars on issues in economic theory and policy. As part of the Advanced Studies Program, participants prepare two working papers, which they present and discuss at special conferences. The papers are published as Kiel Advanced Studies Working Papers. 78 Teaching and Lecturing

A limited number of participants may also attend selected courses only. This arrangement is especially addressed to economists already employed at companies or institutions who have a distinct interest in new developments in their area of work. Since 1984, more than 400 participants have graduated from the program and received the Advanced Studies Certificate (A.S.C.). Many of them have assumed leading positions in governmental and intergovernmental organizations, academic institutions, and international business. The twentieth Advanced Studies Program commenced in August 2003 with 23 participants from 14 different countries (Belgium, Chile, Czech Republic, Denmark, Germany, Finland, France, Great Britain, Italy, Lithuania, Philippines, Slovenia, Spain, Uzbekistan). The first part of the program included the following courses: Macroeconomics in Open Economies (Holger Wolf, Georgetown University, Washington), International Trade (David Greenaway, University of Nottingham), Monetary Policy: Theory and Practice (Jordi Gali, University Pompeu Fabra, Barcelona). The program also included a special course on Empirical Methods in Macro- economics, which was taught by Kai Carstensen and Björn Christensen (Kiel Institute). During the second part of the program in 2003/04 the following courses will be offered: International Financial Markets (Richard Levich, New York University), Global Banking (Ingo Walter, New York University), Empirical Methods in Finance (Stefan Mittnik, University of Munich), Economic Growth and Development (Sebastian Edwards, University of California at Los Angeles) The Economics of Labour Markets (Dennis Snower, Birkbeck College, London) The application period for the next session of the program—which will begin in August 2004—has already begun. The following economists will be teaching in the next session: Giuseppe Bertola (University of Turin), Marius Brülhart (Uni- versity of Lausanne), Manzie Chinn (University of Wisconsin), Paul De Grauwe (University of Louvain), Philip Lane (University of Dublin), Keith Maskus Guest Lectures and Seminars at Universities 79

(University of Colorado), Maurice Obstfeld (University of California at Berkeley), Athanasios Orphanides (Federal Reserve Board, Washington), Andres Velasco (Harvard University), Fabrizio Zillibotti (University College, London).

3. Guest Lectures and Seminars at Universities

Guest lectures and seminars were held by Alfred Boss at Helmut Schmidt Uni- versity—University of the Bundeswehr Hamburg; Kai Carstensen at the Uni- versity of Hamburg; Erich Gundlach at the University of Gießen; Christophe Kamps at the University of Groningen; Gernot Klepper at the Royal Veterinary and Agricultural University in Copenhagen; Rolf J. Langhammer at the Uni- versity of Hamburg and the Northwestern University in Xi’an, China; Peter Nunnenkamp at the University of Cologne, the University of Leipzig, and the University of St. Gallen; Sonja Peterson at the University of Hamburg; Horst Siebert at Conservatoire National des Arts et des Métiers in Paris, Wirtschafts- universität Wien, Johns Hopkins University in Washington, and Universität St. Gallen; Lúcio Vinhas de Souza at Reading University; Ludger Wößmann at Stanford University.

V. Conferences

1. Conferences Organized by the Institute

The Institute’s traditional Kiel Week Conference was held on June 23–24, 2003, under the heading “Macroeconomic Policies in the World Economy.” It dealt with the increased global integration of goods, capital, and financial markets over the recent years. Renowned economists from all over the world as well as representatives of nongovernmental organizations presented their research and discussed the impact of globalization on the cyclical patterns in the world economy and on macroeconomic policies. In particular, the conference participants discussed whether cyclical interdependence has increased in the past decades and what the main transmission channels of international macroeconomic fluctuations are. A major goal of the conference was to investigate the consequences of the increasingly complex international interdependence for macroeconomic policies. The effectiveness of national macro policies in a globalized world was analyzed and the need for and feasibility of more international coordination was examined. The Institute welcomed the following participants (among others): Michael J. Artis (European University Institute, San Domenico di Fiesole), Ray Barrell (National Institute of Economic and Social Research, London), Michael D. Bordo (Rutgers University, New Brunswick), Günter Endruweit (University of Kiel), Andreas Freytag (University of Cologne), Joseph E. Gagnon (Federal Re- serve Board, Washington), Dieter Goetze (University of Regensburg), Linda Goldberg (Federal Reserve Bank of New York), Mathias Hoffmann (University of Dortmund), Gerhard Illing (University of Munich), M. Ayhan Kose (Inter- national Monetary Fund, Washington), Robert Kollmann (University of Bonn), Enrique G. Mendoza (University of Maryland, College Park), Søren Bo Nielsen (Copenhagen Business School, Frederiksberg), Matthew J. Slaughter (Dartmouth College, Hanover), Frank Smets (European Central Bank, Frankfurt), Linda Tesar (University of Michigan, Ann Arbor), Edwin M. Truman (Institute for International Economics, Washington), Andrés Velasco (Kennedy School of Government, Cambridge). Rolf J. Langhammer, Harmen Lehment, Joachim Scheide, Horst Siebert, and Rüdiger Soltwedel represented the Institute. In March and September, the 67th and 68th Business Cycle Conferences took place at the Institute. Whereas the conference in March was overshadowed by the Iraq conflict and the oil price increase, the conference in September was characterized by some optimism, since the world economic prospects were Conferences Organized by the Institute 81

brightening after the middle of the year. About one hundred experts from Europe, Japan, and the United States discussed the main question of how strong and sustainable the upswing will be. They focused on the risks for the upswing. In particular, the high current account deficit of the United States may rise as a result of the divergencies in the international upswing and this rise may lead to a marked devaluation of the dollar and a rise in the U.S. interest rates if the confidence in the upswing weakens. Then the recovery of the world economy would be dampened. At the beginning of July, the Institute, together with the Wüstenrot-Stiftung, held a regional economics conference entitled “Räumlicher Strukturwandel im Zeit- alter des Internet—Neue Herausforderungen für Raumordnung und Stadtent- wicklung” [Regional Structural Change in the Age of the Internet—New Challenges for Spatial Structure and Urban Development]. At this conference, the results of a research project entitled “Raumstruktur und New Economy—Zur Bedeutung von E-commerce” [Spatial Structure and the New Economy—On the Significance of E-Commerce] were presented to numerous researchers who are specialized in regional economics and in similar fields of research. The implications of regional structural change associated with the Internet, e-commerce, and other modern types of information and communication technologies (ICT) for regional economics were discussed. At the conference, the Institute was represented by Rüdiger Soltwedel (who presented a paper entitled “Raumwirt- schaftliche Ansätze zur Erklärung der Konsequenzen eines fortschreitenden Einsatzes von IT-Techniken auf die Raumstruktur” [Regional Economics Ap- proaches for Explaining the Implications of the Increasing Application of ICT for Spatial Structure]), Dirk Dohse (who presented a paper entitled “Die Raum- struktur von Neuen Markt Firmen in Deutschland” [Regional Distribution of Neuer Markt Enterprises in Germany]), Claus-Friedrich Laaser (who presented a paper entitled “Auswirkungen eines verstärkten IT-Einsatzes auf das räumliche Bild der ‘alten Ökonomie’” [Consequences of the Increasing ICT Application for the Regional Character of the ‘Old Economy’], and Jörg-Volker Schrader (who presented a paper entitled “Herausforderungen des IT-bedingten Struktur- wandels für Raumordnung und Stadtplanung—eine Einführung” [Challenges Posed by the Regional Structural Change Associated with ICT to Spatial Struc- ture and Urban Policy—An Introduction]). Furthermore, a number of workshops were organized by the Institute in 2003. In collaboration with the BJU (Young Entrepreneurs’ Association), the Institute organized a workshop on March 7 at which private entrepreneurs and researchers exchanged their views on various topical economic policy issues pertaining to the health system, unemployment insurance, China’s WTO accession, and an 82 Conferences

economic constitution for Europe. The Institute was represented by Alfred Boss, Klaus Schrader, Rüdiger Soltwedel, Dean Spinanger, and Jürgen Stehn. The Institute was also host of a workshop on “Economics with Heterogeneous Interacting Agents,” which was organized by the Institute of Economics of the Economic and Social Sciences Department of the University of Kiel on May 29– 31, 2003. The papers presented at the workshop gave answers to the questions of how dynamic economic processes are induced by the interactions of agents in a complex world and of how these processes are influenced by the specific form of the interactions. When modeling the interactions of heterogeneous agents, the researchers not only used the concepts developed in economics but also those developed in other social sciences and in natural sciences. The papers presented at the workshop showed that this interdisciplinary approach can make an essential contribution to explaining the fluctuations in the international financial markets. The workshop also showed that explicit modeling of the heterogeneous agents’ interactions provides important insights into the determinants of economic growth and the cyclical fluctuations of economic activity. The Institute was represented by Christian Pierdzioch, who presented his paper entitled “Noise Trad- ing and the Effects of Monetary Policy Shocks on Nominal and Real Exchange Rates.” As part of a research project entitled “European Financial Markets, Venture Capital, and High Tech Firms,” financed by the European Commission, the Institute organized an international workshop entitled “The Future of Venture Capital after the Neuer Markt,” which was held on June 5, 2003. The participants discussed theoretical and empirical research issues, in particular the role venture capital plays when start-up firms try to access European capital markets. In this context, the participants discussed how venture capital can raise the efficiency of the start-up firms’ initial public offerings and what the determinants of venture capital activities are in various European countries. Finally, the participants discussed the consequences of the recent financial market crisis for venture capital management and economic policy. From the Institute’s staff, Andrea Schertler presented her paper entitled “Driving Forces of Venture Capital Investment in Europe” and Michael Stolpe presented his paper on “Learning and Signaling in the French and German Venture Capital Industries.” In collaboration with the Center for Information and Network Economics of the Seminar für Ökonometrie, Finanzökonometrie und Statistik of the University Munich, a workshop on “Economics of Information and Network Industries” was held on August 29–30, 2003. More than 40 researchers from all over the world presented their theoretical and empirical research results. The invited speaker was Hal Varian (UC Berkeley), who gave a talk entitled “Economics of Conferences Organized by the Institute 83

Information Technology.” The researchers discussed issues of price formation on electronic markets, of competition on software markets, and of price formation and investment incentives on the markets for electricity and telecommunications. The Institute was represented by Jörn Kleinert. A workshop entitled “Monetary Policy and Macroeconomic Stabilization in Latin America” was held on September 11–12, 2003. Experts from central banks and multilateral organizations such as the International Monetary Fund, the Inter- American Development Bank, and the OECD presented their views on internal and external aspects of stabilization. The discussion focused on the pros and cons of monetary policy rules and inflation targeting, both instruments that can help to solve credibility problems of monetary policy in industrializing countries with flexible exchange rates. The workshop was supported by the European Commis- sion, the European Central Bank, and the Deutsche Bundesbank. Rolf J. Langhammer, Rainer Schweickert, and Lúcio Vinhas de Souza represented the Institute. Felix Hammermann presented his paper “Do Exchange Rates Matter in Inflation Targeting Regimes? Evidence from a VAR Analysis for Poland and Chile.” The “First Annual Conference on the Euro-Latin Network on Integration and Trade—An Initiative of the Inter-American Development Bank” was held on November 6–7, 2003, in Barcelona. The Institute, together with the Centre de Recerca en Economia Internacional Barcelona and the Robert Schuman Centre for Advanced Studies of the European University Institute Florence founder of the network, organized the session dealing with the eastern enlargement of the EU and the adjustment process. Other topics of the workshop were regional integration and economic convergence and growth. The Institute was represented by Rolf J. Langhammer and Rainer Schweickert. In collaboration with the Arbeitsgemeinschaft Selbständiger Unternehmer (Workgroup of Independent Entrepreneurs), the Institute arranged an economic policy workshop on December 11, 2003. Private entrepreneurs and researchers of the Institute exchanged their views on different topical economic policy issues, such as the issues of subsidies, privatization, business cycles, and economic policy strategies. The Institute was represented by Alfred Boss, Hugo Dicke, Harmen Lehment, and Joachim Scheide. On the occasion of the Kiel Week, the Institute once again organized a Lecture Series (June 24–27, 2003), in order to present its research activities to a broader audience. Numerous interested visitors to the Kiel Week used the occasion to inform themselves about current economic policy and research questions. Peter Nunnenkamp spoke on “Why Do So Many Developing Countries Lose from Globalization?”, Jürgen Stehn on “The European Union: Fit for the Eastern 84 Conferences

Enlargement?”, Claus-Friedrich Laaser on “Spatial Effects of Mobility Taxes,” and Joachim Scheide on “Will Germany Get Over Its Growth Weakness?”. The following economists lectured at the Institute’s Staff Seminars in 2003: David B. Audretsch (Indiana University) on “Entrepreneurship and Economic Growth,” Ali Bayar (Free University of Brussels) on “An Overview of Economic Modelling in Public Policy Making,” Fabio Ghironi (Boston College) on “Pro- ductivity Shocks and Consumption Smoothing in the International Economy,” Menzie Chinn (University of California at Santa Cruz) on “Empirical Exchange- Rate Models of the Nineties: Are They Fit to Survive?” and Wilhelm Kohler (University of Linz) on “Welfare Effects of Eastern Enlargement of Incumbent EU Countries.”

2. External Conferences

In 2003, many of the Institute’s economists were invited to participate in, or present papers at, conferences in Germany and other countries:

BORBÉLY, D., Money Macro and Finance Research Group of the 35th Annual Conference in Cambridge (paper “A Primer on Budgetary Questions on the New EU Member States”). BOSS, A., Workshop “Hayek-Tage 2003” of the Friedrich A. von Hayek-Gesell- schaft in Marburg. BOSS, A., J. SCHEIDE, H. SIEBERT, Jour Fixe of the ARGE at the BMWA in Berlin. BUCH, C.M., Annual Conference of the Association for Comparative Economic Studies in Washington (paper “Financial Integration and Stability in Transition Economies: Does the Mode of Entry Matter?”). BUCH, C.M., ECB Workshop in Helsinki (paper “International Diversification and Bank Asset Portfolios”). BUCH, C.M., SUERF Seminar “Security Financial Stability” in Malta (paper “Foreign Bank Ownership: A Bonus or Threat for Financial Stability?”). BUCH, C.M., Workshop of the Bank of Finland and the Journal of International Money and Finance in Helsinki (paper “Exporting Financial Institutions Management via Foreign Direct Investment Mergers and Acquisitions”). BUCH, C.M., IFLIP Workshop of the ILO in Geneva (paper “Globalization and Financial Stability”). External Conferences 85

BUCH, C.M., 10th Annual Conference of the DGF in Mainz (paper “International Diversification in Bank Asset Portfolios”). BUCH, C.M., Annual Conference of the Western Economic Association in Denver (paper “Determinants of German FDI: New Evidence from Microdata” and “Migration and FDI: Evidence from German States”). BUCH, C.M., Paper presented at the IMF in Washington, entitled “Financial Openness and Business Cycle Volatility.” CARSTENSEN, K., Conference of the Deutsche Statistische Gesellschaft in Rostock (paper “Estimating the ECB Policy Reaction Function”). CARSTENSEN, K., Research Seminar of the Volkswirtschaftliche Abteilung of the Deutsche Bundesbank in Frankfurt/M. CHRISTENSEN, B., IAB Colloquium “Praxis trifft Wissenschaft—Arbeitsmarkt: Neue Instrumente im Einsatz” in Bad Boll. CHRISTENSEN, B., Conference “Social and Economic Data” in Wiesbaden. Foundation Committee of the Council for Social and Economic Data. DEKE, O., BIOLOG Europe Workshop “Biodiversity in the Cultural Landscape” of the Justus-Liebig-Universität Gießen in Rauischholzhausen. DEKE, O., BIOLOG Workshop “Messung und ökonomische Bewertung von Bio- diversität: Mission Impossible?” of the Universität Magdeburg in Wendgräben. DEKE, O., 4th BioEcon Workshop on “The Economics of Biodiversity Con- servation” in San Servolo/Venice (paper “Supply-Side Externalities in Markets for Genetic Resources”). DEKE, O., 4th Interdisciplinary Expert Meeting “Agreement on Biological Diversity” of the Bundesamt für Naturschutz, Internationale Naturschutzaka- demie on the Isle of Vilm (paper “Zwei internationale Konzeptionen zur Bewah- rung biologischer Vielfalt—Handel mit genetischen Ressourcen und Transfers im Kontext von Naturschutzgebieten”). DOHSE, D., Annual Conference of the Ausschuss für Regionaltheorie und Regionalpolitik of the Verein für Socialpolitik in Ingolstadt (paper “Regionale Konzentration und Wachstum von jungen High-Tech Unternehmen in Deutsch- land”). DOHSE, D., 43rd European Congress of the Regional Science Association in Jyväskylä, Finland (paper “Concentration, Coagglomeration and Spillovers— The Geography of New Market Firms in Germany”). FODERS, F., Annual Conference of the Deutsche Gesellschaft für Demographie in Wiesbaden (paper “Wanderungen von Osteuropa nach Deutschland: Neue empirische Ergebnisse”). 86 Conferences

FODERS, F., Symposium of the Leibniz-Gemeinschaft “Demographische Heraus- forderung für die Wirtschafts- und Sozial- sowie Raumwissenschaft” in Nurem- berg (paper “Demographie und Bildung”). FODERS, F., Workshop of the BMWA “Beschäftigungschancen durch Moderni- sierung der deutschen Wirtschaft—Lösungsansätze für eine Gesellschaft im demographischen Wandel” in Berlin (contribution to the discussion “Demo- graphischer Wandel und Humankapital”). FODERS, F., Meeting “Migrationsbewegungen im 21. Jahrhundert” of the Institut für Qualitätsentwicklung an Schulen in Schleswig-Holstein in Quickborn (paper “Die EU-Osterweiterung: Migrationspotenziale und Migrationsprobleme”). GERN, K.-J., German-French-Russian Conference “Die EU und Russland in der neuen Weltordnung” of the Staatliches Institut für Internationale Beziehungen in Moscow (paper “Mechanismen der wirtschaftlichen Governance im Zeitalter der Globalisierung”). GERN, K.-J., 3rd EUROFRAME Conference “Growth Prospects for the Euro Area” in Berlin. GERN, K.-J., F. OSKAMP, J. SCHEIDE, Meeting of the European Economic Institutes (AIECE) in Stockholm und Brussels. GIERSCH, H., Economic Policy Symposium of the Herbert-Giersch-Stiftung “Fortschritt und Sicherheit” in Berlin. GIERSCH, H., Economic Policy Symposium of the Herbert-Giersch-Stiftung “Für einen neuen Aufschwung—Internationale Koordination?” in Frankfurt/M. GUNDLACH, E., R.J. LANGHAMMER, Annual Meeting of the Ausschuss für Entwicklungsländer of the Verein für Socialpolitik “Aspekte der Nachhaltigkeit in der Evaluierung der Entwicklungszusammenarbeit” in Hamburg. GUNDLACH, E., L. WÖSSMANN, Annual Meeting of the Bildungsökonomischer Ausschuss of the Verein für Socialpolitik in Zurich (paper “Bildungsressourcen, Bildungsinstitutionen und Bildungsqualität: Makroökonomische Relevanz und Mikroökonomische Evidenz”). HAMMERMANN, F., Meeting of the Fachschaft Wirtschafts- und Sozialwissen- schaften at the Cusanuswerk in Bonn (paper “Wirtschaftswissenschaftliche Mo- dellbildung”). HENKE, J.M., Annual Meeting of the International Energy Workshop in Laxen- burg, Austria (paper “Tax Exemption for Biofuels in Germany: Is Bio-Ethanol Really an Option for Climate Policy?”). HENKE, J.M., Global Ecolabelling Network (GEN) 2003 Conference in Prague. External Conferences 87

KAMPS, C., Annual Meeting of the Royal Economic Society in Warwick (paper “New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960–2001”). KAMPS, C., Annual Meeting of the International Institute of Public Finance in Prague (paper “New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960–2001”). KAMPS, C., 55th Conference of the International Atlantic Economic Society in Vienna (paper “New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960–2001”). KLEINERT, J., Conference of the University of Nottingham “Export and Produc- tivity” in Nottingham (paper “On the Coexistence of National and Multinational Firms”). KLEPPER, G., Expert Meeting “Umweltpolitik als Instrument ziviler Krisenprä- vention” at the Bundesministerium für Umwelt, Naturschutz und Reaktorsicher- heit in Berlin. KLEPPER, G., Annual Meeting of the International Energy Workshop in Laxenburg, Austria. KLEPPER, G., Round-Table Discussion “Klimaänderungen—Bewertung von Un- sicherheiten als Grundlage für rationales Handeln” at the Deutsches Zentrum für Luft- und Raumfahrt (DLR) in Cologne. KLEPPER, G., DFG Round-Table Discussion “Megastädte und Global Change- Forschung” in Bensberg. KLEPPER, G., Workshop “GATES—Generating Alternatives for Adaptation and Mitigation Investment: Timely European Strategies” at the PIK-Potsdam-Institut für Klimafolgenforschung in Potsdam. KLEPPER, G., Workshop at the Royal Veterinary and Agricultural University in Copenhagen (paper “Simulating the Economic Effects of Climate Change—The Integration of a Climate Model with an Economic Model”). KLEPPER, G., DFG Workshop “Anwendungsorientierung der Global Change Forschung” in Berlin. KLEPPER, G., Workshop “Blick in PIKs Zukunft” at the PIK-Potsdam-Institut für Klimafolgenforschung in Potsdam. KLODT, H., Workshop “Mobilfunk zwischen Wettbewerb und Regulierung” of the Hamburger Forum Medienökonomie at the Universität der Bundeswehr Hamburg (paper “Besteht Regulierungsbedarf im Mobilfunk?”). KLODT, H., Forum “Ist Deutschland fit für die Wissensgesellschaft?” of the Friedrich-Ebert-Stiftung in Berlin (paper and panel discussion “Innovation, Wachstum, Produktivität—Schöne neue Wissensökonomie?”). 88 Conferences

KLODT, H., Forum “Globalisierung—Kritisch weitergedacht” of the Katholische Akademie in Munich (paper “Eine Auseinandersetzung mit den Thesen von ATTAC”). KLODT, H., Academy “Chancen und Probleme der Globalisierung” of the Stif- tung der Deutschen Wirtschaft für Qualifizierung und Kooperation in Tannen- felde (paper “Chancen und Risiken der Globalisierung”). KLODT, H., Workshop “Staatliche Verantwortung für hochtechnologische Inno- vationen” of the Stiftung Brandenburger Tor in Berlin (paper “Die Rolle des Staates bei erfolgreichen Innovationen”). KUHN, A., 66th Meeting of the ARGE in Berlin (paper “The International Transmission of Monetary Policy Shocks”). LAASER, C.-F., Urban Forum “City.net—Cities in the Age of Telecom- munications” at the Bauhaus-Universität in Weimar (paper “New Economy and Spatial Structure—Decline or Accentuation of Urban Texture”). LANGHAMMER, R.J., 36th Research Seminar Radein “Ordnungsprobleme der Weltwirtschaft” in Radein (paper “Alternative Integrationskonzepte: Theoreti- sche Begründung, empirische Befunde und pragmatische Implikationen”). LANGHAMMER, R.J., Summer Academy Europe, Strategy Group of the Bertels- mann-Stiftung “Europäische Sicherheit und globale Verantwortung” in Kloster Seeon (paper “Wie wettbewerbsfähig ist Europa in der Weltwirtschaft?”). LANGHAMMER, R.J., 9th Congress of Politische Bildung of the Bundeszentrale für politische Bildung in Braunschweig “Dialog zwischen Kulturen, Ethnien und Religionen—Herausforderungen an die politische Bildung” (paper “Reformen globaler Regelsysteme: Wege zu mehr Chancengleichheit, Partizipation und Mit- verantwortung”). LANGHAMMER, R.J., Conference of the Vienna Institute for International Economic Studies “WTO Round: Basic Issues” in Vienna (paper “The WTO Development Round: A Non-European Look to Europe”). LANGHAMMER, R.J., Meeting of the Chicago Conference on the Global Economy 2003 “The Future of the Global Trading System” in Chicago (paper “The Future of the Global Trading System”). LANGHAMMER, R.J., Workshop of the BMW Stiftung Herbert Quandt “Deutsche Außenpolitik im Spannungsfeld von nationalen Interessen, moralischen Ansprü- chen und neuer amerikanischer Dominanz” in Munich (paper “Die Durchsetzung wirtschaftlicher Interessen der EU und der USA im multi- und bilateralen Kontext”). External Conferences 89

LANGHAMMER, R.J., International Conference of the Konrad-Adenauer-Stiftung in Shanghai (paper “China’s Role in the WTO Doha Round. A European Perspective”). LAY, J., OECD Development Centre Seminar “How Are Globalisation and Poverty Interacting?” in Paris. LAY, J., Annual Bank Conference on Development Economics in Europe “Eco- nomic Integration and Social Responsibility” of the World Bank in Paris. LAY, J., International Conference “Attacking Poverty: What Makes Growth Pro- Poor” of the Hamburgisches Weltwirtschaftsarchiv in Hamburg. LAY, J., International Conference “Economic Policy Modeling” of the Ecomod Network in Instanbul (paper “Globalisation and Poverty Changes in Colombia”). LORZ, O., Annual Meeting of the European Economic Association in Stockholm (paper “Unemployment, Social Transfers, and International Capital Mobility”). LORZ, O., Conference “Migration and the Welfare State” of CESifo Economic Studies in Munich (paper “Mobility, Political Participation and the Size of the Welfare State”). LORZ, O., Passau Workshop “Internationale Wirtschaftsbeziehungen” in Passau (paper “Unemployment, Social Transfers, and International Capital Mobility”). MUNDHENKE, J., OpenSaar 2003—2nd Expert Meeting “Open Source Ap- proaches” of the OpenSaar and the Universität des Saarlandes in Saarbrücken. MUNDHENKE, J., Round-Table Discussion “Open Source Software” of the Bundesministerium für Wirtschaft und Arbeit in Berlin. NUNNENKAMP, P., Meeting “Lateinamerika und Europa: Perspektiven der wirtschaftlichen, politischen und kulturellen Beziehungen” of the Evangelische Aka- demie in Loccum (paper “Zwischen Wunsch und Wirklichkeit: Strukturelle Be- dingungen für Direktinvestitionen in Lateinamerika”). NUNNENKAMP, P., Expert Seminar “Aid Effectiveness and Selectivity: Inte- grating Multiple Objectives into Aid Allocations” of the OECD in Paris. NUNNENKAMP, P., Seminar “Herausforderung erkennen—Zukunft gestalten” of the Bundesakademie für Sicherheitspolitik in Siegburg (paper “Das internationale Wirtschaftsgefüge und die verteilungspolitischen Herausforderungen der Glo- balisierung”). NUNNENKAMP, P., Review Meeting of the EU-India Network on Trade and Development der Consumer Unity & Trust Society in Brussels (paper “Why the Case for a Multilateral Agreement on Investment Is Weak”). NUNNENKAMP, P., Seminar “Investment for Development” of the Consumer Unity & Trust Society in Geneva (paper “Does FDI Lead to Growth or Vice Versa?”). 90 Conferences

NUNNENKAMP, P., Final Conference “Regulierung von Arbeit” of the Wissen- schaftszentrum Berlin für Sozialforschung in Berlin (discussion “Internationali- sierungsstrategien der 90er Jahre in den Transformationsländern und ihre Rück- wirkungen”). NUNNENKAMP, P., XX International Scientific Conference “Regionalisation and Globalisation in the World Economy” of the University of Economics in Wroclaw (paper “Reforming the International Financial Architecture: What Globalisation Critics Demand and What Policymakers Have (Not) Achieved”). NUNNENKAMP, P., Seminar “Globalisierung: Event oder Prozess?” of the Theodor Heuss Akademie in Gummersbach (paper “Die Reform des IWF und der Weltbank”). NUNNENKAMP, P., Regional Seminar “Aktuelle Fragen der Sicherheitspolitik” of the Bundesakademie für Sicherheitspolitik in Wiesbaden (paper “Finanzströme ohne Grenzen: Funktionsmängel und Störungen des Weltfinanzsystems”). NUNNENKAMP, P., 2nd German-Argentine Dialogue Forum “Argentinien und Deutschland im Wandel” of the Stiftung Wissenschaft und Politik in Berlin (panel discussion “Wirtschaftliche und politische Herausforderungen”). NUNNENKAMP, P., Workshop “Internationale Finanzmärkte und Entwicklung,” held at the Summer University of the Friedrich-Ebert-Stiftung in Potsdam (paper “Sinn und Realisierungsmöglichkeiten von Regulierungsmaßnahmen für die internationalen Finanzmärkte”). NUNNENKAMP, P., Summer Academy “Chancen und Probleme der Globali- sierung” of the Studienförderwerk Klaus Murmann (Stiftung der Deutschen Wirtschaft) in Tannenfelde (paper “Strukturmerkmale und Herausforderungen der Globalisierung”). NUNNENKAMP, P., International Conference “Sustainable Growth and Environ- mental Protection: The Case of China” of the Universität Duisburg-Essen and the University of Maryland in Duisburg (discussion “The Environmental Effects of China’s FDI Inflows”). NUNNENKAMP, P., German-French-Russian Conference “Die EU und Russland in der neuen Weltordnung” of Staatliches Institut für Internationale Beziehungen in Moscow (paper “Die Nord-Süd-Problematik nach dem G8-Gipfel von Evian”). NUNNENKAMP, P., Panel Discussion “Globalisierung der Weltwirtschaft—Fluch oder Entwicklungschance?” of the Friedrich-Ebert-Stiftung in Magdeburg. NUNNENKAMP, P., International Conference “South vs. South: The Transpacific Race to the Bottom?” of the Friedrich-Ebert-Stiftung and the Centro de Investigación y Docencia Económicas (CIDE) in Mexico-City (paper “Latin America in the International Economy: A Critical Assessment”). External Conferences 91

PETERSON, S., Workshop “Emissions Trading and Project-Based Mechanisms: Synergies between Emerging Regimes” as part of the EU Project “Concerted Action on Tradable Permits (CATEP)”, organized by the Foundation for Inter- national Environmental Law and Development (FIELD), United Nations En- vironment Programme (UNEP), and the Central European University (CEU) in Budapest. PETERSON, S., Workshop “Global Forum on Sustainable Development: Emis- sions Trading” of the OECD in Paris (paper “Monitoring, Accounting and En- forcement in Tradable Permit Regimes”). PETERSON, S., Synthesis Workshop “Maximising the Potential of Emissions Trading in Advancing Sustainability Agendas in an Expanded European Union —the Role of Research” as part of the EU Project “Concerted Action on Tradable Permits (CATEP)” in Brussels. PETERSON, S., 1st International Workshop on Integrated Climate Models: “An Interdisciplinary Assessment of Climate Impacts and Policies” as part of the Ecological and Environmental Economics Programme of the International Centre for Theoretical Physics (ICTP) in Triest (paper “Integrated Climate Modelling at the Kiel Institute for World Economics”). PETERSON, S., Research Workshop “Business and Emissions Trading” of the Ge- sellschaft für Operations Research (GOR) and the Martin-Luther-Universität Halle-Wittenberg in Wittenberg (paper “The EU Emissons Trading Scheme and Its Competitiveness Effects for European Business—Results from the CGE Model DART”). PETERSON, S., Lectures at the International Centre for Theoretical Physics (ICTP) in Triest as part of the “Preparatory Lectures for the 1st International Workshop on Integrated Climate Models.” PIERDZIOCH, C., Annual Meeting of the European Economic Association in Stockholm (paper “Financial Openness and Business Cycle Volatility”). SCHEIDE, J., 34th Konstanz Seminar on “Monetary Theory and Monetary Policy” on Reichenau Island. SCHEIDE, J., European Business Leaders Convention in Helsinki (paper “The German Economy”). SCHEIDE, J., Seminar at the Federal Reserve Bank of Richmond in Richmond, Calif. (paper “Macroeconomic Policy Coordination in Europe”). SCHEIDE, J., 45th NABE Conference in Atlanta, Ga. (paper “Perspectives for the German Economy”). SCHERTLER, A., Annual Meeting of the Verein für Socialpolitik in Zurich (paper “Driving Forces of Venture Capital Investment in Europe”). 92 Conferences

SCHRADER, J.-V., Annual Meeting of the Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaus in Stuttgart. SCHRADER, K., Seminar “Transformationsprozesse in Osteuropa” of the Landes- institut Schleswig-Holstein für Praxis und Theorie der Schule in Tannenfelde (paper “Die Baltischen Staaten auf der Überholspur in die EU?”). SCHRÖDER, H., Meetings of the Facharbeitsgruppe “Technische Infrastruktur” des GBV in Hamburg, Magdeburg, and Kiel. SCHRÖDER, H., Meeting “Datenfunk und 2D-Codierung” of the IT-Anwender- kreis Norddeutschland at the IHK in Kiel (organization and chair). SCHRÖDER, H., Meeting “IT Controlling” of the IT-Anwenderkreis Norddeutsch- land in cooperation with the IZ Sozialwissenschaften (Bonn) at the IHK in Kiel (organization and chair). SCHRÖDER, H., Meeting “IT Sicherheit” of the IT-Anwenderkreis Nord- deutschland at the IHK in Kiel (organization). SCHWEICKERT, R., 6th Limburg Seminar “Reformpolitik in Entwicklungs- und Transformationsländern” of the Verein für Entwicklungsökonomische For- schungsförderung (EFF) in cooperation with KfW and the DEG in Eisenach (paper “Glaubwürdigkeit, Timing und Sequencing wirtschaftlicher Reformen”). SCHWEICKERT, R., Third FES-SWP North-South Dialogue on Global Govern- ance Challenges “Reshaping Globalisation: A New Order for Financial Markets” in Berlin (paper “Which Exchange Rate Regime for Emerging Markets?”). SCHWEICKERT, R., Expert Meeting “Tobin/Spahn-Tax—ein Konzept mit Zu- kunft?” of the Evangelische Akademie in Hamburg. SCHWEICKERT, R., Seminar “Wissenschaft und Praxis” of the Lehrstuhl für Ordnungstheorie und Wirtschaftspolitik at the Philipps-Universität Marburg in cooperation with the Hanns Martin Schleyer-Stiftung in Bad Hersfeld (paper “Indikatoren zum Stand der Wirtschaftsreformen in den Kandidatenländern für die Osterweiterung der EU”). SEUSING, E., Coordination Meeting of the European Documentation Centres of the European Commission, Directorate-General for Information and Com- munication in Brussels. SIEBERT, H., Meeting “Corporate Governance, Takeovers and the European Model(s) of Capitalism” of the Group of Economic Analysis (GEA) of the European Commission in Brussels. SIEBERT, H., Discussion Series “Soziale Marktwirtschaft heute” of the Bertels- mann Stiftung, Heinz Nixdorf Stiftung, and Ludwig-Erhard-Stiftung in Hamburg (introductory paper “Von der Blockade zum Aufbruch—Diagnose und Hand- lungsempfehlungen” and panel discussion). External Conferences 93

SIEBERT, H., 12th Aspen European Dialogue “Redesigning Europe. Challenges for the Italian Presidency of the Union” in Rome (paper “How to Improve Economic Governance”). SIEBERT, H., Meeting “Vierzig Jahre Sachverständigenrat 1963–2003” in Berlin (panel discussion “Die Jahresgutachten des Sachverständigenrates im Spiegel der Politik”). SOLTWEDEL, R., CESifo Conference “Privatisation Experiences in the EU” in Munich (comment on Knieps “Privatization of Network Industries in Germany”). SOLTWEDEL, R., Expert Meeting of the IRS/Erkner “Knoten im Netz” in Erkner (paper “Raumstruktur der New Economy—Tod der Distanz? Niedergang der Städte?”). SOLTWEDEL, R., Conference “Neue Medien—neue Arbeit? Hamburg im Ver- gleich mit internationalen Metropolen” of the TU Harburg in Hamburg. SOLTWEDEL, R., Meeting of the Studienstiftung des deutschen Volkes and the Robert Bosch Stiftung in Berlin (paper “Internationale Wirtschaftsentwicklung”). SOLTWEDEL, R., International Conference “Urban and Regional Science and Development” of Beijing University (paper “ICT and Functional Urban Specialization—Empirical Findings for Germany”). SOLTWEDEL, R., Expert Meeting of the Centre for Education in International Management (CEIM), Hanoi and the GTZ Office in Hanoi (paper “Regional Policy in Germany After Unification—Experiences and Lessons for Vietnam”). SOLTWEDEL, R., Conference “Urbanität und Identität zeitgenössischer euro- päischer Städte” of the Wüstenrot Stiftung and the ETH in Zurich (paper “Zur Ökonomie der europäischen Städte im Zeitalter der Globalisierung”). SPINANGER, D., EU Conference “The Future of Textiles and Clothing after 2005” in Brussels (paper “The Future of T & C after 2004: Quota Elimination & Trade Liberalization re. Sustainable Development”). SPINANGER, D., Annual Conference of the Swedish Textile Importers in Göteborg (paper “575 Days Left…the Clock Is Running: Should We Chill the Champagne?”). SPINANGER, D., Annual Conference of the European Textile Finishing Industry in Bergen (paper “What Will Happen to World Trade? Consequences of China’s WTO Accession and Liberalization Trends”). SPINANGER, D., Conference “The Anti-Dumping Explosion: Explanations and Business Strategies” at King & Spalding, Ernst & Young in London. SPINANGER, D., 6th Annual GTAP Conference in The Hague (joint paper with J. Francois “From 0 to 60 without a Hitch? Regulated Efficiency, WTO Acces- sion and the Motor Vehicle Sector in China”). 94 Conferences

SPINANGER, D., GTZ Symposium “Social Standards in the RMG Industry: Case of Bangladesh” in Berlin (paper “What Does the Quota Elimination and China’s WTO Accession Mean for Bangladesh? What to Do?”). SPINANGER, D., APEC Capacity-Building Workshop “Quantitative Methods for Assessing NTMs and Trade Facilitation” in Bangkok (paper “The Rag Trade Lives On: Trends, Threats and Reality for the ATC after China’s WTO Accession”). SPINANGER, D., UNCTAD Hearing “The Developing Countries and the End to NTBs on Textile and Clothing Trade” in Geneva (paper “Beyond Eternity: What Will Happen when T&C Quotas Are Eliminated as of 31/12/2004?”). STEHN, J., Workshop “Europa der Zukunft” of the Karl-Theodor-Molinari- Stiftung in Dresden (paper “Eine ökonomische Verfassung für Europa”). STOLZ, S., Workshop “European Integration and Banking Efficiency” of the Centro de Investigação Sobre Economia Financeira in Lisbon (paper “Capital Regulation and Bank Behavior: Evidence for German Savings Banks”). THIELE, R., Conference “Attacking Poverty: What Makes Growth Pro-Poor” of Hamburgisches Weltwirtschaftsarchiv in Hamburg (paper “Growth, Poverty, and Income Distribution in Bolivia: A Sectoral and Regional Perspective”). THIELE, R., 25th International Conference “Reshaping Agriculture’s Con- tribution to Society” of the International Association of Agricultural Economists in Durban (paper “Price Incentives, Non-Price Factors, and Agricultural Pro- duction in Sub-Saharan Africa: A Cointegration Analysis”). THIELE, R., 17th World Seminar “Armut und soziale Sicherung im Trans- formationsprozess der mittel- und osteuropäischen EU-Beitrittsländer: Bestands- aufnahme, Armutsursachen und Armutsbekämpfung” of the Zentrum für internationale Wirtschaftsbeziehungen at the Universität Leipzig in Leipzig (paper “Strategien zur Bekämpfung der weltweiten Armut”). VINHAS DE SOUZA, L., Conference “The Econometrics of Emerging Countries” of the Universität Toledo in Toledo (paper “Financial Liberalization and Business Cycles: The Experience of the Future EU Member States in the Baltics and Central Eastern Europe”). VINHAS DE SOUZA, L., Second Workshop on Macroeconomic Policy Research of the Central Bank of Hungary in Budapest. VINHAS DE SOUZA, L., Annual Conference of the “Money, Macro and Finance Research Group” of Cambridge University in Cambridge. VINHAS DE SOUZA, L., Sixth Conference on Global Economic Analysis in Scheveningen (paper “Global Trade Analysis Project”). External Conferences 95

VINHAS DE SOUZA, L., Conference “Regional Partnerships Project Conference” of the Center for Integration, Research, and Projects in Saint Petersburg. VINHAS DE SOUZA, L., First Workshop of the USAID/IRIS Project of the New Economic School in Moscow. VINHAS DE SOUZA, L., DG ECOFIN Seminar Series of the European Commission in Brussels. WIEBELT, M., Workshop “Poverty Impacts of Macroeconomic Reforms in Bolivia” of the Universidad Cathólica Boliviana in La Paz (papers “Los Canales de Transmision entre las Reformas Estructurales y la Pobreza” and “Orientando la Política Macroeconómica en Favor de los Pobres: Resultados de Simulaciones Seleccionados”). WOLF, H., SIB Congress of the Hochschule Bremen in Bremen (discussant). WOLF, H., 2nd Workshop on Applied Infrastructure Research (“Regulation and Investment in Infrastructure Provision—Theory and Practice”) of the TU Berlin and the DIW in Berlin (paper “Airport Privatisation—Mitigating the Hold Up- Problem”). WOLF, H., VIII Annual Meeting “See- und Luftverkehrsmärkte im Umbruch— Weltwirtschaftliche Strukturänderungen auf strategischen Märkten” of the Insti- tut für Weltwirtschaft and the International Management at the Universität Bremen in Bremen (paper “Möglichkeiten und Grenzen der Privatisierung von Airports”). WOLF, H., Workshop “The Role of Competition in the Future Airport Industry” of the German Aviation Research Society in Leipzig (paper “Airport Alliances and Mergers—Will There Be a Few Dominant Airport Operators in the Future?”). WOLF, H., Workshop “How to Make Slot Markets Work” of the German Aviation Research Society in Bremen (paper “Proposal for a 2nd Best Mechanism for Auctioning Airport Slots”). WÖSSMANN, L., Annual Meeting of the American Economic Association in Washington (paper “Class-Size Effects in School Systems around the World: Evidence from Between-Grade Variation in TIMSS”). WÖSSMANN, L., Annual Conference of the Royal Economic Society in Warwick. WÖSSMANN, L., Conference of the Centre for the Economics of Education (CEE), London School of Economics, London. WÖSSMANN, L., Workshop “Bildungspolitik” of the DIW in Berlin. WÖSSMANN, L., Research Seminar of the Forschungsinstitut zur Zukunft der Arbeit (IZA) in Bonn.

VI. Publications

The economists at the Kiel Institute presented their research findings to economists, the business community, and the general public in in-house publications and out-of-house publications. The in-house publications were edited by the Editorial Group (headed by Diet- mar Gebert). In addition, this Group edited papers presented by economists from home and abroad on the occasion of the Kiel Week Conference, and also articles accepted for publication in the “Review of World Economics (Weltwirtschaft- liches Archiv)” upon recommendation by a referee. In 2003, the Editorial Group edited 6 “Kieler Studien/Kiel Studies,” 10 “Kieler Diskussionsbeiträge/Kiel Discussion Papers,” and 4 issues of the Institute’s quarterly journals: “Review of World Economics (Weltwirtschaftliches Archiv)” and “Die Weltwirtschaft.” In addition, the Institute published the conference volume entitled “Global Governance: An Architecture for the World Economy” and the Bernhard-Harms-Lecture by Stanley Fischer entitled “Financial Crises and Reform of the International Financial System.” The Institute also published a booklet entitled “Die Weltwirtschaft vor den Herausforderungen von morgen,” which contains the lectures held at a meeting of the Society for the Promotion of the Kiel Institute for World Economics.

1. In-House Publications

Summaries of the Institute’s publications were published in 18 “Kieler Kurzbe- richte” and, for the English-speaking public, in 10 “Kiel Reports.” Further information on the following 2003 publications can be found, together with information on the Institute’s 2002 publications, in “Publikationsverzeichnis/Publica- tions 2002–2003” and on the Internet (http://www.ifw-kiel.de). Furthermore, the Institute’s Internet homepage contains information about ongoing research activities at the Institute, about the organizational structure of the Institute, and about the services offered by the Library and the Economic Ar- chives. Additionally, abstracts of the publications and the full text of some research papers can be downloaded. In 2003, the Internet was accessed on average about 230,000 times per month. Most of the time, the reports on the current business situation and the list of new publications were accessed. In-House Publications 97

B Kieler Studien/Kiel Studies

BRAUER, H., The Real Exchange Rate and Prices of Traded Goods in OECD Countries. KLODT, H., ET AL., Die neue Ökonomie: Erscheinungsformen, Ursachen und Auswirkungen. KRANCKE, J., Internationaler Handel mit Kommunikationsdienstleistungen. An- forderungen an ein multilaterales Regelwerk und die Reform des GATS. LORZ, O., Intergenerative Umverteilung in der repräsentativen Demokratie. SCHERTLER, A., Dynamic Efficiency and Path Dependencies in Venture Capital Markets. WOLF, H., Privatisierung im Flughafensektor. Eine ordnungspolitische Analyse.

B Contributions to the Conference Volume of the Institute

LORZ, O., Do National Governments Lose Their Maneuvering Space in the Era of Locational Competition and What Can They Do? In: H. Siebert (ed.), Global Governance: An Architecture for the World Economy. Berlin: Springer-Verlag. SIEBERT, H., On the Fears of the International Division of Labor: Eight Points in the Debate with Anti-Globalizationers. In: H. Siebert (ed.), Global Governance: An Architecture for the World Economy. Berlin: Springer-Verlag.

B Review of World Economics (Weltwirtschaftliches Archiv)

This quarterly journal contains articles by scholars from all over the world who are dedicated to the mainly empirical analysis of international economics. The articles deal with trade in goods and services, currency regimes and exchange rates, foreign trade policy, capital flows and migration of labor, economic development in individual countries, and the international coordination of economic policies. In editing the journal, the Institute was advised by its International Advisory Board, the members of which were Alberto F. Alesina (Harvard University, Cambridge, Mass.), Richard E. Baldwin (Graduate Institute of International Studies, Geneva), Paul De Grauwe (Univer- sity of Louvain), Barry Eichengreen (University of California at Berkeley), Fran- cesco Giavazzi (Bocconi University, Milan), David Greenaway (University of Nottingham), Elhanan Helpman (Harvard University, Cambridge, Mass., and Tel 98 Publications

Aviv University), Arye L. Hillman (Bar-Ilan University, Ramat Gan, Israel), J. Peter Neary (University College, Dublin), Maurice Obstfeld (University of Cali- fornia at Berkeley), Richard Pomfret (University of Adelaide), Niels Thygesen (University of Copenhagen), Holger C. Wolf (Georgetown University, Washing- ton), Charles Wyplosz (Graduate Institute of International Studies, Geneva). In 2003, staff members of the Institute published the following papers in the “Review of World Economics”:

CARSTENSEN, K. (coauthor J. Hawellek), Forecasting Inflation from the Term Structure. PIERDZIOCH, C. (coauthors M. Frenkel and G. Stadtman), Modeling Coordinated Foreign Exchange Market Interventions: The Case of the Japanese and U.S. Interventions in the 1990s.

B Die Weltwirtschaft

Each issue of this quarterly journal contains analyses of, and forecasts about, business cycles in Germany and several other industrial countries. In addition, in 2003 the journal dealt with various other research topics, such as GATS and international trade in services, the eastern enlargement of the EU, the structure of wages and qualifications in Germany, the tax reform in Germany, the international development policy after the Washington Consensus, the motives of German FDI in nonindustrialized countries, and the new direction of international trade of Baltic countries.

BENNER, J., D. BORBÉLY, A. BOSS, A. KUHN, C.-P. MEIER, F. OSKAMP, J. SCHEIDE and R. SCHMIDT, Deutschland: Stagnation hält vorerst an. BENNER, J., D. BORBÉLY, A. BOSS, A. KUHN, C.-P. MEIER, F. OSKAMP, J. SCHEIDE and R. SCHMIDT, Deutschland erneut in der Rezession. BENNER, J., D. BORBÉLY, A. BOSS, A. KUHN, C.-P. MEIER, F. OSKAMP, J. SCHEIDE and R. SCHMIDT, Leichte Belebung der Konjunktur in Deutschland. BENNER, J., D. BORBÉLY, K.-J. GERN, C. KAMPS, A. KUHN, B. SANDER and J. SCHEIDE, Durchgreifende Erholung der Weltkonjunktur nochmals verzögert. BENNER, J., D. BORBÉLY, K.-J. GERN, C. KAMPS, A. KUHN, B. SANDER and J. SCHEIDE, Weltkonjunktur kommt in Fahrt. BENNER, J., A. BOSS, A. KUHN, C.-P. MEIER, F. OSKAMP, J. SCHEIDE and R. SCHMIDT, Konjunktur in Deutschland nimmt etwas Fahrt auf. BENNER, J., K.-J. GERN, C. KAMPS, A. KUHN, B. SANDER and J. SCHEIDE, Konjunktur in den Industrieländern zieht nur allmählich an. In-House Publications 99

BENNER, J., K.-J. GERN, C. KAMPS, A. KUHN, B. SANDER and J. SCHEIDE, Industrieländer: Aufschwung setzt sich durch. BOSS, A., and P. ELENDNER, Steuerreform und Lohnsteueraufkommen in Deutschland—Simulationen auf Basis der Lohnsteuerstatistik. BUCH, C.M., Die Osterweiterung der EU aus ökonomischer Sicht. CARSTENSEN, K., K.-J. GERN, C. KAMPS and J. SCHEIDE, Euroland: Stagnation wird allmählich überwunden. CHRISTENSEN, B., Die Entwicklung der qualifikatorischen Lohndifferenzierung in Deutschland. GERN, K.-J., Fünf Jahre nach der Krise—Wo steht Asien heute? GERN, K.-J., and D. BORBÉLY, Die EU-Osterweiterung—Makroökonomische Aspekte aus der Sicht der Beitrittsländer. GERN, K.-J., C. KAMPS, C.-P. MEIER, F. OSKAMP and J. SCHEIDE, Euroland: Er- holung gewinnt allmählich an Fahrt. JOST, T., and P. NUNNENKAMP, Deutsche Direktinvestitionen in Entwicklungs- und Reformländern: Haben sich die Motive gewandelt? KLODT, H., Das Telekommunikationsgesetz vor der Novellierung. LAASER, C.-F., and K. SCHRADER, Neue Partner in Europa: Der baltische Außenhandel im Umbruch. LANGHAMMER, R.J., Das GATS: Noch kein Liberalisierungsmotor für den internationalen Dienstleistungshandel. SCHWEICKERT, R., Vom Washington-Konsens zum Post-Washington-Dissens? Glaubwürdigkeit, Timing und Sequencing wirtschaftlicher Reformen.

B Kieler Diskussionsbeiträge/Kiel Discussion Papers

Several “Kiel Discussion Papers” analyzed the current economic situation in Europe and eastern Germany; others dealt with issues pertaining to structural, cyclical, development, and transportation policies.

BODE, E., Die Reform der Handwerksordnung: ein notwendiger Schritt in die richtige Richtung. CARSTENSEN, K., K.-J. GERN, C. KAMPS and J. SCHEIDE, Gradual Recovery in Euroland. GERN, K.-J., C. KAMPS, C.-P. MEIER, F. OSKAMP and J. SCHEIDE, Euroland: Re- covery Will Slowly Gain Momentum. 100 Publications

GERN, K.-J., C.-P. MEIER and J. SCHEIDE, Higher Economic Growth through Macroeconomic Policy Coordination? The Combination of Wage Policy and Monetary Policy. GERN, K.-J., C.-P. MEIER and J. SCHEIDE, Evidence of the New Economy at the Macroeconomic Level and Implications for Monetary Policy. NUNNENKAMP, P., and M. PANT, Why the Case for a Multilateral Agreement on Investment Is Weak. SCHWEICKERT, R., R. THIELE and M. WIEBELT, Makroökonomische Reformen und Armutsbekämpfung in Bolivien: Ebnet die HIPC-Initiative den Weg zu so- zialverträglicher Anpassung? SICHELSCHMIDT, H., Lohnt sich die private Bereitstellung von Infrastruktur? Das Beispiel der Fehmarnbelt-Querung. Zweiter Fortschrittsbericht wirtschaftswissenschaftlicher Forschungsinstitute über die wirtschaftliche Entwicklung in Ostdeutschland.

B Kieler Arbeitspapiere/Kiel Working Papers

In 2003, the “Kiel Working Papers” dealt with a wide range of topics: labor market, education, fiscal and monetary policies, social security systems, environmental policy, and income distribution. In several working papers, the refine- ment of statistical methods was the topic. All working papers are available on the Internet (http://www.ifw-kiel.de/pub/kap/kap.htm) as pdf files.

AMMERMÜLLER, A., H. HEIJKE and L. WÖSSMANN, L., Schooling Quality in Eastern Europe: Educational Production during Transition. BENNER, J., and C.-P. MEIER, Prognosegüte alternativer Frühindikatoren für die Konjunktur in Deutschland. BORBÉLY, D., and C.-P. MEIER, Macroeconomic Interval Forecasting: The Case of Assessing the Risk of Deflation in Germany. BOSS, A., Arbeits- und Investitionsanreize in Deutschland: Die Rolle der Abga- ben- und Transferpolitik als Determinante des Wachstums des Produktionspo- tentials. BOSS, A, Steuerharmonisierung oder Steuerwettbewerb? BOSS, A., and T. ELENDNER, Steuerreform und Lohnsteueraufkommen in Deutschland—Simulationen auf Basis der Lohnsteuerstatistik. BOSS, A., und A. ROSENSCHON, Finanzhilfen des Bundes. BUCH, C.M., J. KLEINERT and F. TOUBAL, The Distance Puzzle: On the Interpre- tation of the Distance Coefficient in Gravity Equations. In-House Publications 101

BUCH, C.M., J. KLEINERT and F. TOUBAL, Where Enterprises Lead, People Follow? Links between Migration and German FDI. BUCH, C.M., and C. PIERDZIOCH, The Integration of Imperfect Financial Mar- kets: Implications for Business Cycle Volatility. CARSTENSEN, K., Is European Money Demand Still Stable? CARSTENSEN, K., and F. TOUBAL, Foreign Direct Investment in Central and East- ern European Countries: A Dynamic Panel Analysis. CHRISTENSEN, B., Die Validität erfragter Reservationslöhne: ein Test auf Basis der stationären Suchtheorie. CHRISTENSEN, B., Selektionsverzerrungen, erfragte Reservationslöhne und Ar- beitslosigkeitsdauer. CHRISTENSEN, B., Die Reform der Arbeitslosenversicherung im Zuge der Agenda 2010 und ihr Einfluss auf die Arbeitslosigkeitsdauer—Simulationser- gebnisse auf Basis der nicht-stationären Suchtheorie. CLAUSEN, J.R., and C.-P. MEIER, Did the Bundesbank Follow a Taylor Rule? An Analysis Based on Real-Time Data. DICKE, H., Die Beitrittsverträge der EU—eine Bilanzierung. FODERS, F., Long-Run Determinants of Immigration to Germany 1974–1999: A Ricardian Framework. FRENKEL, M., C. PIERDZIOCH and G. STADTMANN, The Effects of Japanese For- eign Exchange Market Interventions on the Yen/U.S. Dollar Exchange Rate Volatility. GLISMANN, H.H., and K. SCHRADER, Zur Einführung privater Arbeitslosenversi- cherungen in Deutschland. HAMMERMANN, F., Comparing Monetary Policy Strategies—Towards a General- ized Reaction Function. HEID, F., D. PORATH and S. STOLZ, Does Capital Regulation Matter for Bank Behavior? Evidence for German Savings Banks. HEITGER, B., Property Rights and Their Impact on the Wealth of Nations—A Cross-Country Study. HENKE, J.M., G. KLEPPER and N. SCHMITZ, Tax Exemption for Biofuels in Germany: Is Bio-Ethanol Really an Option for Climate Policy? KLEINERT, J., On the Coexistence of National Companies and Multinational En- terprises. KLEPPER, G., and S. PETERSON, On the Robustness of Marginal Abatement Cost Curves: The Influence of World Energy Prices. 102 Publications

KLEPPER, G., S. PETERSON and K. SPRINGER, DART97: A Description of the Multi-regional, Multi-sectoral Trade Model for the Analysis of Climate Policies. KLODT, H., Border Effects in Passenger Air Traffic. LANGHAMMER, R.J., Assessing EU Concessions for Service Trade Liberalization in the Doha Round: What Frequency Indices Suggest. MAUSSNER, A., and J. SPATZ, Determinants of Business Cycles in Small Scale Macroeconomic Models: The German Case. NUNNENKAMP, P., Economic Policy, Institutional Development, and Income Growth: How Arab Countries Compare with Other Developing Countries. NUNNENKAMP, P., and J. SPATZ, Intellectual Property Rights and Foreign Direct Investment: The Role of Industry and Host-Country Characteristics. NUNNENKAMP, P., and J. SPATZ, Foreign Direct Investment and Economic Growth in Developing Countries: How Relevant Are Host-Country and Industry Characteristics? PIERDZIOCH, C., Noise Trading and the Effects of Monetary Policy Shocks on Nominal and Real Exchange Rates. PIERDZIOCH, C., Home-Product Bias, Capital Mobility, and the Effects of Mone- tary Policy Shocks in Open Economies. PIERDZIOCH, C., Capital Mobility and the Effectiveness of Fiscal Policy in Open Economies. PIERDZIOCH, C., Keeping Up with the Joneses: Implications for the Welfare Ef- fects of Monetary Policy in Open Economies. PIERDZIOCH, C., and G. STADTMANN, The Effectiveness of the Interventions of the Swiss National Bank—An Event-Study Analysis. ROSENSCHON, A., Zur Finanzlage Berlins—ein Vergleich mit Hamburg. ROSENSCHON, A., Ist die Finanzpolitik der Bundesländer nachhaltig? SCHEIDE, J., Macroeconomic Policy Coordination in Europe—An Agnostic View. SCHERTLER, A., Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis. SICHELSCHMIDT, H., Zur Frage einer Infrastrukturlücke Ostdeutschlands ge- genüber Westdeutschland. SIEBERT, H., Reform-Notwendigkeiten der Alters- und Gesundheitsvorsorge. Zwölf Thesen. SIEBERT, H., Deutschland in der Krise—Wie wird die Starre aufgelöst? SIEBERT, H., Germany’s Social Security System under Strain. Out-of-House Publications 103

SIEBERT, H., The Failure of the German Labor Market. SIEBERT, H., Why Germany Has Such a Weak Growth Performance. SIEBERT, H., Germany—An Immigration Country. SPATZ, J., The Impact of Structural Reforms on Wages and Employment: The Case of Formal versus Informal Workers in Bolivia. STOLPE, M., Distribution Dynamics in European Venture Capital. STOLPE, M., Learning and Signalling in the French and German Venture Capital Industries. STOLPE, M., Ressourcen und Ergebnisse der globalen Gesundheitsökonomie. Einführung und Überblick. WÖSSMANN, L., Educational Production in East Asia: The Impact of Family Background and Schooling Policies on Student Performance. WÖSSMANN, L., and M. WEST, Which School Systems Sort Weaker Students into Smaller Classes? International Evidence.

2. Out-of-House Publications

Many of the Institute’s economists published their research findings with out-of- house publishers or in out-of-house journals, many of which are refereed journals.

B Monographs and Edited Volumes

DOHSE, D., and R. SOLTWEDEL (coeditor J. Bröcker), Innovation Clusters and Interregional Competition. Advances in Spatial Science Series. Berlin: Springer- Verlag. KLEPPER, G. (coauthor), Bioethanol in Deutschland. Verwendung von Ethanol und Methanol aus nachwachsenden Rohstoffen im chemisch-technischen und im Kraftstoffsektor unter besonderer Berücksichtigung von Agraralkohol. Schriften- reihe “Nachwachsende Rohstoffe,” Band 21. Münster: Landwirtschaftsverlag. SAILER, K. (coeditor T. Doganoglu). Special issue of the journal “Netnomics,” entitled “Special Issue on the Microeconomics of the New Economy.” Kluwer Academic Publishers. SIEBERT, H., Einführung in die Volkswirtschaftslehre. 14. vollständig über- arbeitete und erweiterte Auflage. Stuttgart: Kohlhammer. 104 Publications

SIEBERT, H., Der Kobra-Effekt. Wie man Irrwege der Wirtschaftspolitik ver- meidet. Taschenbuchausgabe. Munich: Piper. VINHAS DE SOUZA, L. (coeditor B. van Aarle), The Euroarea and the New EU Member States. London: Palgrave-Macmillan Press. VINHAS DE SOUZA, L., Beyond Transition: Essays on the Monetary Integration of the Accession Countries in Eastern Europe. Tinbergen Institute Research Series. Amsterdam: Thela Thesis.

B Articles in Economic Journals

Refereed Journals

BICKENBACH, F., and E. BODE, Evaluating the Markov Property in Studies of Economic Convergence. International Regional Science Review. BODE, E., The Spatial Pattern of Localized R&D Spillovers: An Empirical Investigation for Germany. Journal of Economic Geography. BUCH, C.M. (coauthors A.N. Berger, G. DeLong, R. DeYoung), Exporting Financial Institutions Management via Foreign Direct Investment Mergers and Acquisitions. Journal of International Money and Finance. BUCH, C.M. (coauthor G. DeLong), Cross-Border Bank Mergers: What Lures the Rare Animal? Journal of Banking and Finance. BUCH, C.M, and C. PIERDZIOCH (coauthor J. Döpke), Business Cycle Volatility in Germany. German Economic Review. BUCH, C.M., and C. PIERDZIOCH (coauthor J. Döpke), Financial Openness and Business Cycle Volatility. Journal of International Money and Finance. CARSTENSEN, K., The Finite-Sample Performance of Robust Unit Root Tests. Statistical Papers. CARSTENSEN, K., Nonstationary Term Premia and Cointegration of the Term Structure. Economics Letters. CARSTENSEN, K. (coauthor G. Hansen), Inflationäre Schocks in Deutschland: Eine Common Trends Analyse. Jahrbücher für Nationalökonomie und Statistik. GLISMANN, H.H., and K. SCHRADER, Eine effiziente Arbeitslosenversicherung für Deutschland. Ordo. GLISMANN, H.H., and K. SCHRADER, Private Arbeitslosenversicherungen—Risi- koprämien statt Zwangsbeiträge. Zeitschrift für Wirtschaftspolitik. GUNDLACH, E., Growth Effects of EU Membership: The Case of East Germany. Empirica. Out-of-House Publications 105

HEITGER, B., and J. STEHN, Trade, Technical Change, and Labour Market Adjustment. World Economy. KLEINERT, J., Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing or Increasing Importance of MNE Networks? Review of International Economics. KLEPPER, G., Climate Protection Strategies: International Allocation and Distribution Effects. Climatic Change. KLODT, H., Fuzje w gospodarze świato wej. Polska Niemcy Europa. KUMKAR, L., Regulatory Choices and Commitment—Challenges for Electricity Market Regulation in Kosovo. Post-Communist Economies. LAASER, C.-F. (coauthor P. Jakubowski), Neue Wege der Verkehrswegefinan- zierung im Spiegel raumordnerischer Ziele und Grundsätze. Raumforschung und Raumordnung. LANGHAMMER, R.J., Halving Poverty by Doubling Aid: Is there Reason for Optimism? World Economy. NUNNENKAMP, P., Ausländische Direktinvestitionen in Lateinamerika: Ent- täuschte Hoffnungen trotz attraktiver Standortbedingungen? Lateinamerika Ana- lysen. NUNNENKAMP, P., Wachstumsdivergenz zwischen Entwicklungsländern: Hat die Entwicklungsökonomie versagt? Zeitschrift für Wirtschaftspolitik. NUNNENKAMP, P., Why Economic Growth Trends Differ So Much across Devel- oping Countries in the Era of Globalisation. Pakistan Development Review. NUNNENKAMP, P., and J. SPATZ, Determinants of FDI in Developing Countries: Has Globalization Changed the Rules of the Game? Transnational Corporations. PIERDZIOCH, C. (coauthors M. Frenkel and G. Stadtmann), The Accuracy of Press Reports Regarding the Foreign Exchange Interventions of the Bank of Japan. Journal of International Financial Markets, Institutions, and Money. PIERDZIOCH, C. (coauthors M. Frenkel and G. Stadtmann), On the Determinants of “Small” and “Large” Foreign Exchange Market Interventions: The Case of the Japanese Interventions in the 1990s. Review of Financial Economics. THIELE, R., The Social Impact of Structural Adjustment in Bolivia. Journal of International Development. SCHERTLER, A., A Comparative Overview of Venture Capital in Europe and the United States. International Journal of Entrepreneurship Education. SCHWEICKERT, R., Makroökonomische Beschränkungen des Wachstumspro- zesses und Auswirkungen auf die Armutsreduzierung. Lateinamerika Analysen. 106 Publications

SPATZ, J., The Impact of Structural Reforms on Wages and Employment: The Case of Formal versus Informal Workers in Bolivia. Latin American Journal of Economic Development. STEHN, J., International Trade in Cyberspace: How to Tax Digital Goods. Journal of Economic Integration. STEHN, J., Elektronischer Handel und Steuerstaat: Neue Herausforderungen in der Neuen Ökonomie. Zeitschrift für Wirtschaftspolitik. STOLPE, M., Weltweiter Patentschutz für pharmazeutische Innovationen: Gibt es sozialverträgliche Alternativen? Perspektiven der Wirtschaftspolitik. STOLPE, M. (coauthor C. Ploog), Die Fehlbewertung junger Aktiengesellschaften beim Gang an die Börse: Ursachen und wirtschaftspolitische Konsequenzen. Zeitschrift für Wirtschaftspolitik. THIELE R. (coauthor D. Piazolo), A Social Accounting Matrix for Bolivia Featuring Formal and Informal Activities. Latin American Journal of Economics. WIEBELT, M. (coauthor L.C. Jemio), ¿Existe Espacio para Políticas Anti-shocks en Bolivia? Lecciones de un Análisis Basado en un Modelo de Equilibrio General Computable. Revista Latino Americana de Desarollo Económico. WÖSSMANN, L., Schooling Resources, Educational Institutions and Student Performance: The International Evidence. Oxford Bulletin of Economics and Statistics. WÖSSMANN, L., Specifying Human Capital. Journal of Economic Surveys. WÖSSMANN, L. (coauthor M.R. West), Does Reducing Class Size Work? Edu- cation Next.

Nonrefereed Journals

BORBÉLY, D., and C.-P. MEIER, Zum Konjunkturverbund zwischen der EU und den Beitrittsländern. Vierteljahreshefte zur Wirtschaftsforschung. CHRISTENSEN, B. (coauthor U. Brixy), Kompromisse für einen neuen Job. Wer- den—Jahrbuch für die deutschen Gewerkschaften. GLISMANN, H.H., and K. SCHRADER, Unemployment Insurance in Germany: Problems and the Two-Pillar-System. Economic Trends, Statistics Finland. KAMPS, C., and C. PIERDZIOCH, Geldpolitik und vorausschauende Taylor-Regeln —Theorie und Empirie am Beispiel der Deutschen Bundesbank. Wirtschafts- wissenschaftliches Studium. KLODT, H., Subventionsabbau: Jetzt oder später? Wirtschaftswissenschaftliches Studium (WiSt). Out-of-House Publications 107

KUHN, A., The International Transmission of Monetary Policy Shocks. Applied Economics Quarterly (Konjunkturpolitik). LANGHAMMER, R.J., Wer trägt die Finanzierung der Supermacht USA? Die Sparkasse. NUNNENKAMP, P., Improving Development Aid. Internationale Politik—Trans- atlantic Edition. NUNNENKAMP, P., Comments on “Currency Crises in Emerging Economies” (in Finnish). Finnish Economic Journal. NUNNENKAMP, P., FDI for Development? Assessing the Case for a Multilateral Investment Agreement from the Perspective of Developing Countries. Journal of World Investment. NUNNENKAMP, P., Reforming the International Financial Architecture: What Globalization Critics Demand and What Policymakers Have (Not) Achieved. Journal of Financial Transformation. PIERDZIOCH, C. (coauthor G. Stadtmann), Kurzfristorientierung und Informa- tionseffizienz von Finanzmärkten. Wirtschaftswissenschaftliches Studium. PIERDZIOCH, C. (coauthors M. Frenkel and G. Stadtmann), Probleme der Infla- tionsmessung. Das Wirtschaftsstudium. PIERDZIOCH, C. (coauthor G. Stadtmann), Kapitalanlage—Männer sind vom Mars, Frauen von der Venus? Die Sparkasse. PIERDZIOCH, C. (coauthor G. Stadtmann), Die Debatte um die Transparenz der Geldpolitik der Europäischen Zentralbank. Zeitschrift für das gesamte Kredit- wesen. PIERDZIOCH, C. (coauthors M. Frenkel and G. Stadtmann), Die optimale Ausge- staltung der EZB-Offenmarktpolitik. Das Wirtschaftsstudium. PIERDZIOCH, C. (coauthors M. Frenkel and G. Stadtmann), Wechselkurswir- kungen sterilisierter Devisenmarktinterventionen. Wirtschaftswissenschaftliches Studium. Siebert, H., Globalisierung: Dimensionen, Ängste und Chancen. Wirtschaftspoli- tische Blätter. VINHAS DE SOUZA, L., A Primer on Budgetary Questions on the New EU Member States. Journal of European Affairs. WÖSSMANN, L., Familiärer Hintergrund, Schulsystem und Schülerleistungen im internationalen Vergleich. Aus Politik und Zeitgeschichte. WÖSSMANN, L., Zentrale Prüfungen als “Währung” des Bildungssystems: Zur Komplementarität von Schulautonomie und Zentralprüfungen. Vierteljahreshefte zur Wirtschaftsforschung. 108 Publications

B Articles in Edited Volumes

International Volumes with Refereed Articles

BUCH, C.M. (coauthor G. DeLong), Determinants of Cross-Border Bank Mergers: Is Europe Different? In: H. Herrmann and R. Lipsey (eds.), Foreign Direct Investment in the Real and Financial Sector of Industrial Countries. Berlin: Springer-Verlag. BUCH, C.M. (coauthor R.P. Heinrich), Financial Integration in Europe and Banking Sector Performance. In: P. Cecchini, F. Heinemann and M. Jopp (eds.), Financial Services Market Integration in Europe. ZEW Economic Studies. Berlin: Springer-Verlag. BUCH, C.M. (coauthors R.P. Heinrich and M. Schrooten), The Political Economy of Banking Reform and Foreign Debt. In: D. Lane (ed.), Russian Banking: Evo- lution, Problems and Prospects. London: Edgar Elgar. CARSTENSEN, K. (coauthor M.S. Paolella), On Median Unbiased Inference for First Order Autoregressive Models. In: I. Klein and S. Mittnik (eds.), Con- tributions to Modern Econometrics: From Data Analysis to Economic Policy. Boston: Kluwer Academic Publishers. DOHSE, D., Taking Regions Seriously: Recent Innovations in German Tech- nology Policy. In: J. Bröcker, D. Dohse and R. Soltwedel (eds.), Innovation Clusters and Interregional Competition. Berlin: Springer-Verlag. DOHSE, D., and R. SOLTWEDEL (coauthor J. Bröcker), Clusters and Competition as Engines of Innovation. In: J. Bröcker, D. Dohse and R. Soltwedel (eds.), In- novation Clusters and Interregional Competition. Berlin: Springer-Verlag. KLEINERT, J. (coauthor L. Schuknecht), New Economy and International Trade. In: D.C. Jones (ed.), New Economy Handbook. San Diego: Academic Press. KLODT, H., Employment Policies in Western Europe. In: F. Nicolas and C. Tingsabadh (eds.), Unemployment in East Asia and Europe. Paris: ifri. LAASER, C.-F., and K. SCHRADER, Knocking on the Door: The Baltic Rim Transition Countries Ready for Europe? In: L. Hedegaard and B. Lindström (eds.), The NEBI Yearbook 2003—North European and Baltic Sea Integration. Berlin: Springer-Verlag. LANGHAMMER, R.J., The Asian Crisis Seen from Europe. In: S. Siddique and S. Kumar (eds.), The 2nd ASEAN Reader. Singapore: Institute of Southeast Asian Studies. NUNNENKAMP, P. (coauthor M. Pant), Why the Economic Case for a Multilateral Agreement on Investment Is Weak. In: L.A. Winters and P.S. Mehta (eds.), Out-of-House Publications 109

Bridging the Differences: Analyses of Five Issues of the WTO Agenda. Jaipur: Consumer Unity & Trust Society. SPINANGER, D. (coauthor S. Verma), The Coming Death of the ATC and China’s WTO Accession: Will Push Come to Shove for Indian T&C Exports? In: L.A. Winters and P.S. Mehta (eds.), Bridging the Differences: Analyses of Five Issues of the WTO Agenda. Jaipur: Consumer Unity & Trust Society. STOLPE, M., The German Health System. In: T.G. Getzen (ed.), Health Eco- nomics—Fundamentals and Flow of Funds. New York: John Wiley and Sons. VINHAS DE SOUZA, L. (coauthor E. Ledrut), Modeling Alternative Paths to EMU for the Accession Countries. In: L. Vinhas de Souza and B. van Aarle (eds.), The Euroarea and the New EU Member States. London: Palgrave-Macmillan Press. VINHAS DE SOUZA, L. (coauthors M. Bakanova, I. Kolesnikova and A. Abramov), Transition and Growth in Belarus. In: G. Ofer and R. Pomfret, Transition and Long-term Growth in the CIS. Camberley: Edward Elgar. WOLF, H., Airport Privatisation and Regulation—Getting the Institutions Right. In D. Gillen, H.-M. Niemeier, D. Starkie and P. Forsyth (eds.), Regulation of Airports. Aldershot: Ashgate. WÖSSMANN, L., Central Exit Exams and Student Achievement: International Evidence. In: P.E. Peterson and M.R. West (eds.), No Child Left Behind? The Politics and Practice of School Accountability. Washington: Brookings Insti- tution Press.

Other Volumes

GUNDLACH, E., Die Bedeutung des Humankapitals für die Unternehmens- entwicklung. In: R. Kappel, U. Dornberger and M. Meier (Hrsg.), Klein- und Mittelunternehmen in Entwicklungsländern—Die Herausforderungen der Globa- lisierung. Hamburg: Deutsches Übersee-Institut. KLEPPER, G., Wirtschaftspolitische Politikberatung und Biodiversität. In: J. Weimann, A. Hoffmann and S. Hoffmann (Hrsg.), Messung und ökonomische Bewertung von Biodiversität: Mission Impossible? Marburg: Metropolis Verlag. KLODT, H., Wettbewerbsstrategien für Informationsgüter. In: W. Schäfer (Hrsg.), Konjunktur, Wachstum und Wirtschaftspolitik im Zeichen der New Economy. Schriften des Vereins für Socialpolitik. Berlin: Duncker & Humblot. KLODT, H., Prospective Trade Effects of Eastern EU Enlargement. In: R. Pethig and M. Rauscher (eds.), Challenges to the World Economy. Festschrift to Horst Siebert. Berlin: Springer-Verlag. KUMKAR, L., Zentralisierung oder Wettbewerb der Regulierungsansätze? Die Kommissionsvorschläge für den Strombinnenmarkt. In: R. Caesar and H.-E. 110 Publications

Scharrer (Hrsg.), Der unvollendete Binnenmarkt. HWWA Studien 72. Baden- Baden: Nomos-Verlagsgesellschaft. LANGHAMMER, R.J., The Design of EU Trade Policies Rationale. Results and Requirements for Reforming Regionalism. In: R. Pethig and M. Rauscher (eds.), Challenges to the World Economy. Festschrift to Horst Siebert. Berlin: Springer- Verlag. LANGHAMMER, R.J., Alternative Integrationskonzepte: Theoretische Begrün- dung, empirische Befunde und pragmatische Implikationen. In: D. Cassel and P.J.J. Welfens (Hrsg.), Ordnungsökonomik integrierter Wirtschaftsräume. Stutt- gart: Lucius & Lucius. LANGHAMMER, R.J., EU’s Experiences of Economic Integration. Reflections on the Rationale, Achievements and Limits of a Top-Down Integration Model. In: A. Petchsiri, P. Sutthisripok and P. Thontiravong (eds.), Comparative Regional Integration: ASEAN and the EU. Bangkok: Chulalongkorn University. LEHMENT, H., European Fiscal Policies under the Stability Pact: Some First In- sights. In: R. Pethig and M. Rauscher (eds.), Challenges to the World Economy. Festschrift to Horst Siebert. Berlin: Springer-Verlag. NUNNENKAMP, P., Die wirtschaftliche Verflechtung Europas und der USA mit China und Japan—Stand und Perspektiven. In: W. Draguhn (Hrsg.), Chinas und Japans Bedeutung für Ostasien und die Weltwirtschaft. Hamburg: Institut für Asienkunde. NUNNENKAMP, P., Zwischen Wunsch und Wirklichkeit: Strukturelle Bedin- gungen für Direktinvestitionen in Lateinamerika. In: H.-P. Burmeister and J. Lange (Hrsg.), Lateinamerika und Europa: Perspektiven der wirtschaftlichen, politischen und kulturellen Beziehungen. Rehburg-Loccum: Evang. Akademie Loccum. SCHEIDE, J., Economic Policy in Germany and the Role of the Economic Ad- viser. In: R. Pethig and M. Rauscher (eds.). Challenges to the World Economy. Festschrift to Horst Siebert. Berlin: Springer-Verlag. SCHRADER, J.-V., Germany: Need for Greater Awareness of Policy Costs. In: Centre for International Economics (ed.), The Political Economy of Beef Liberalization. Canberra: Centre for International Economics. SIEBERT, H., A New Outfit for the IMF. In: H. Knödler and M.H. Stiefle (Hrsg.), Globale und monetäre Ökonomie. Heidelberg: Physica-Verlag. SIEBERT, H., Weshalb die Europäische Währungsunion den Stabilitätspakt braucht. In: K.G. Adam and W. Franz (Hrsg.) Instrumente der Finanzpolitik. Frankfurt/M.: F.A.Z. Institut für Management. Out-of-House Publications 111

SIEBERT, H., Die Distanz als ökonomische Kategorie. In: H. Merkel (Hrsg.), Logistik und Verkehrswirtschaft im Wandel: Unternehmensübergreifende Ver- sorgungsnetze verändern die Wirtschaft. Festschrift für Gösta B. Ihde. Munich: Vahlen. SOLTWEDEL, R., and C.-F. LAASER, Spatial Impacts of the New Economy: Death of Distance and Decline of Cities? In: R. Pethig and M. Rauscher (eds.), Challenges to the World Economy. Festschrift to Horst Siebert. Berlin: Springer- Verlag. STOLZ, S. (coauthor D. Puschmann), Der neue Basler Kapital Akkord und seine Implikationen für Entwicklungsländer. In: U. Mummert and F. Sell (Hrsg.), Globalisierung und nationale Entwicklungspolitik. Schriften zur internationalen Wirtschaftspolitik. Band 1. Münster: LIT-Verlag.

B Discussion Papers / Other Publications

BODE, E., C. KRIEGER-BODEN, and R. SOLTWEDEL (coauthors), European Integration, Regional Structural Change and Cohesion: A Survey of Theoretical and Empirical Literature. EURECO Working Paper. BUCH, C.M., and J. KLEINERT (coauthor F. Toubal), Determinants of German FDI: New Evidence from Micro-Data. Bundesbank Discussion Paper 09/03. Research Centre of the Deutsche Bundesbank. Frankfurt am Main. FODERS, F., Education Policy for Growth and Employment. Current Issues: More Growth for Germany. Deutsche Bank Research, Frankfurt am Main. FODERS, F., Elf Thesen zur Bildungspolitik. Bundesverband deutscher Banken, Berlin. GUNDLACH, E. (coauthor L. Wößmann), Family Background, Schooling Re- sources, and Institutional Features: What Determines Student Performance in East Asian Countries? ICSEAD Working Paper 2003-18. The International Centre for the Study of East Asian Development, Kitakyushu, Japan. KLODT, H., Strategien für den Subventionsabbau. Volkswirtschaftliche Kor- respondenz der Adolf-Weber-Stiftung. LANGHAMMER, R.J., Die Liberalisierung des internationalen Handels mit Dienst- leistungen. Volkswirtschaftliche Korrespondenz der Adolf-Weber-Stiftung. LAY, J. (coauthor M. Bussolo), Globalisation and Poverty Changes: A Case Study on Colombia. Webdoc No. 14. OECD Development Centre, Paris. LAY, J., and M. WIEBELT, Hacia un Sistema de Educación Dual—Una Per- spectiva desde el Mercado Laboral sobre la Reducción de la Pobreza en Bolivia. 112 Publications

Documento de Trabajo 08/2003, Instituto de Investigaciones Socio-Económicas, Universidad Católica Boliviana, La Paz. NUNNENKAMP, P., Reforming the International Financial Architecture: What Globalization Critics Demand and What Policymakers Have (Not) Achieved. In: J. Rymarczyk (ed.), Regionalizacja i Globalizacja w Gospodarce Swiatowej. Akademia Ekonomiczna im. Oskara Langego we Wroclawiu, Wroclaw. NUNNENKAMP, P., FDI as a Source of Finance for Development. Monographs on Investment and Competition Policy 12. CUTS Centre for International Trade, Economics & Environment, Jaipur, India. NUNNENKAMP, P., Wachstumsdivergenz zwischen Entwicklungsländern: Hat die Entwicklungsökonomie versagt? Papers on Africa: Politics and Economics 65. Universität Leipzig, Leipzig. PETERSON, S., Monitoring, Accounting and Enforcement in Emissions Trading Regimes. OECD Paper CCNM/GF/SD/ENV(2003)5. Paris. SIEBERT, H., Müssen Arbeitslose sein? Zur Reform von Arbeitsmarkt und Sozialstaat in Deutschland. Walter Adolf Jöhr-Vorlesung 2003 an der Universität St. Gallen. STOLPE, M., Learning and Signalling in the French and German Venture Capital Industries. EIFC—Tech & Finance Working Paper Series of the United Nations University, Maastricht. THIELE, R., and M. WIEBELT, Attacking Poverty in Bolivia—Past Evidence and Future Prospects: Lessons from a CGE Analysis. Documento de Trabajo 06/2003. Instituto de Investigaciones Socio-Económicas, Universidad Católica Boliviana, La Paz. WIEBELT, M. (coauthor L.E. Andersen), La Mala Calidad de Educacíon en Bolivia: El Efecto sobre el Creciemiento, el Empleo, la Desiguldad y la Pobreza. Documento de Trabajo 02/2003. Instituto de Investigaciones Socio-Económicas, Universidad Católica Boliviana, La Paz. WIEBELT, M. (coauthor L.C. Jemio), ¿Existe Espacio para Políticas Anti- shocks en Bolivia? Lecciones de un Análisis Basado en un Modelo de Equilibrio General Computable. Documento de Trabajo 01/2003. Instituto de Investigaciones Socio-Económicas, Universidad Católica Boliviana, La Paz. WÖSSMANN, L. (coauthors A. Ammermüller and H. Heijke), Schooling Quality in Eastern Europe: Educational Production during Transition. ROA Research Memorandum ROA-RM-2003/2E. Research Centre for Education and the Labour Market, Faculty of Economics and Business Administration, Maastricht University. Out-of-House Publications 113

WÖSSMANN, L., Educational Production in East Asia: The Impact of Family Background and Schooling Policies on Student Performance. ICSEAD Working Paper Series 2003-17. The International Centre for the Study of East Asian Development, Kitakyushu, Japan. WÖSSMANN, L. (coauthor M.R. West), Which School Systems Sort Weaker Students into Smaller Classes? International Evidence. IZA Discussion Paper 744. Institute for the Study of Labor, Bonn. WÖSSMANN, L., European Education Production Functions: What Makes a Dif- ference for Student Achievement in Europe? European Economy, Economic Papers No. 190. European Commission, Directorate-General for Economic and Financial Affairs.

VII. Appendix

1. Recipients of the Bernhard Harms Prize, the Bernhard Harms Medal, and the Bernhard Harms Prize for Young Economists

B Bernhard Harms Prize Every two years the president of the Institute awards the Bernhard Harms Prize, which is currently endowed with euro 25,000. The recipient is either a professor who has distinguished himself/herself through extraordinary achievement in the field of international economics or someone in the business community who has made a significant contribution to the improvement of world economic relations. The recipient is chosen by the Prize Committee of the Gesellschaft zur Förde- rung des Instituts für Weltwirtschaft (Society for the Promotion of the Kiel In- stitute for World Economics). After receiving the prize, which bears the name of the Institute’s founder, the recipient holds the Bernhard Harms Lecture, which is then published by the Institute. The Bernhard Harms Prize was awarded for the first time in 1964 in honor of the 50th anniversary of the founding of the Insti- tute. The recipients of this prize to date are:

Prof. Dr. Dr. h.c. GERHARD COLM, Washington, D.C. (1964) SIR ROY HARROD, Christ Church College, Oxford (1966) Drs. h.c. HERMANN JOSEF ABS, Frankfurt am Main (1968) Prof. Dr. WASSILY LEONTIEF, Harvard University/New York University (1970) Prof. Dr. Drs. h.c. GOTTFRIED HABERLER, Harvard University/American Enter- prise Institute, Washington, D.C. (1972) Prof. Dr. Drs. h.c. FRITZ MACHLUP, Princeton University (1974) Prof. HARRY G. JOHNSON, Ph.D., University of Chicago (1976) Prof. Dr. h.c. CHARLES P. KINDLEBERGER, Ph.D., Massachusetts Institute of Technology, Cambridge, Mass. (1978) Prof. Dr. ERIK LUNDBERG, Stockholm School of Economics (1980) Prof. Dr. WILLIAM FELLNER, Yale University/American Enterprise Institute, Washington, D.C. (1982) Prof. Dr. BELA BALASSA, Ph.D., Johns Hopkins University, Baltimore/The World Bank, Washington, D.C. (1984) Prof. W. MAX CORDEN, Ph.D., Australian National University, Canberra (1986) Recipients of the Bernhard Harms Prize, the Bernhard Harms Medal 115

Prof. JAGDISH BHAGWATI, Ph.D., Columbia University, New York (1988) Prof. ANNE O. KRUEGER, Ph.D., Duke University, Durham (1990) Prof. Dr. h.c. RUDIGER DORNBUSCH, Ph.D., Massachusetts Institute of Technol- ogy, Cambridge, Mass. (1992) Prof. MARTIN FELDSTEIN, Ph.D., Harvard University/National Bureau of Econ- omic Research, Cambridge, Mass. (1994) Prof. Dr. ASSAR LINDBECK, Universität Stockholm/Institute for International Economic Studies, Stockholm (1996) Prof. ELHANAN HELPMAN, Ph.D., Harvard University/Department of Economics (1998) Prof. JEFFREY D. SACHS, Ph.D., Harvard University/Center for International Development (2000) Prof. STANLEY FISCHER, Ph.D., former First Deputy Managing Director of the International Monetary Fund/Massachusetts Institute of Technology, Cambridge, Mass. (2002).

B Bernhard Harms Medal

The Bernhard Harms Medal is awarded at irregular intervals. The medal is awarded to persons who have contributed to the Kiel Institute’s research on the world economy in the tradition of Bernhard Harms. The recipients of the Bernhard Harms Medal to date are:

Prof. Dr. OTTO PFLEIDERER, Stuttgart (1980) Dr. KURT PENTZLIN, Hannover (1980) Dr. DAVID GROVE, Washington, D.C. (1981) TADEUSZ M. RYBCZYNSKI, M.Sc., London (1983) Prof. GEORGE FRANK RAY, London (1983) Prof. Dr. WOLFGANG F. STOLPER, Ann Arbor, Michigan (1984) KARL-GUSTAV RATJEN, President of the Society for the Promotion of the Kiel Institute for World Economics, 1971–1984 (1984) Dr. HANS D. BARBIER, Frankfurt am Main (1986) Prof. Dr. GERHARD FELS, Cologne, Vicepresident of the Kiel Institute for World Economics, 1976–1983 (1986) Prof. Dr. RUDOLF SCHEID, Frankfurt am Main (1988) Prof. Dr. KARL SCHILLER, Jesteburg-Osterberg (1989) Dr. h.c. TYLL NECKER, Bad Oldesloe (1989) 116 Appendix

Prof. Dr. JUERGEN B. DONGES, Cologne,Vicepresident of the Kiel Institute for World Economics, 1983–1989 (1991) Prof. Dr. Drs. h.c. HELMUT SCHLESINGER, Deutsche Bundesbank, Frankfurt am Main (1992) Prof. INGO WALTER, Ph.D., New York University (1992) BIRGIT BREUEL, President of the Treuhandanstalt, Berlin (1994) Prof. Dr. HERBERT GRUBEL, Vancouver (1995) Prof. VÁCLAV KLAUS, President of the Parliament of the Czech Republic (1999) Prof. Dr. Dr. h.c. MARCUS BIERICH, Stuttgart, President of the Society for the Promotion of the Kiel Institute for World Economics, 1984–2000 (2000) REINHARD MOHN, Gütersloh (2000).

B Bernhard Harms Prize for Young Economists

The Bernhard Harms Prize for Young Economists is endowed with euro 7,500 and is awarded at irregular intervals. The recipients are economists of the Kiel Institute for World Economics who have conducted distinctive scientific research and are not older than 33 years. The aim of the Prize is to promote young, qualified scientists by making it possible for them to attend an internationally renowned university or visit a research institution. The recipients of the prize to date are:

Dr. ANDREAS GRÖHN (1998) Dr. CHRISTIAN PIERDZIOCH (2001) Dr. KATRIN SPRINGER (2002) Dr. LUDGER WÖSSMANN (2002).

2. Staff (as of January 1, 2004)

Afrifa, Ljiljana L Behrens, Rainer L Albrecht, Angelika L Beling, Marlies L Altmann, Flora L Benner, Joachim R V Andersson, Carmen R III Bickenbach, Frank R III Arnhold, Regina R I Bliemeister, Beate A Arpe, Jutta M. P Bluhm, Mathias A Auschrat, Marie-Luise L Bode, Eckhardt R III Boss, Alfred R V Baethe, Sabine R II Brammer, Raymond L Ballert, Jörg P. A Brauer, Martin A Staff 117

Braunisch, Axinia A Gillam, Almuth L Bredemeyer, Annemarie L Glamann, Elke L Brüggmann, Aurette L Glindemann, Marisa A Bruhse, Hans-Dieter L Glismann, Hans H. R I Bungenstock, Jan Michael P Glowatzka, Marion R II Büxenstein-Gaspar, Ilse IEER Goretzko, Fred L Gosch, Detlef L Carstensen, Kai R V Grabsch, Nora L Christensen, Björn R I Graemer, Rosel A Colavecchio, Roberta P Grewe, Marianne L Grey, Antje L Daleske, Jana L Gruebner, Carola L Davidsen, Martina L Gruner, Simone L Deichsel, Stefan L Güder, Christine L Deke, Oliver R II Gummersbach, Birgit IEER Dick, Hermann L Gundlach, Erich R IV Dicke, Hugo R I Guttzeit, Christel L Diek, Sinje R V Dönges, Doris A Hackländer, Burkhard L Dohse, Dirk R III Hahn-Mieth, Almut R I Dürhager, Arthur L Halbfas, Rita R I Hammermann, Felix R IV Ebbesen, Sven A Harder, Corinna L Eckeberg, Elisabeth IEER Harders, Dörte L Eggemann, Gesa L Hartz, Hans-Hermann L Ehlert, Ulrike L Heinecke, Ute R V Ente, Werner IEER Heinen, Ruth L Esanov, Akram P Henke, Jan M. R II Henke, Regine R V Fett, Ursula R III Herda, Eduard P Feuring, Maria IEER Hess, Borge L Fingerle, Birgit L Holst, Helga L Fischer, Renate A Hölterhoff, Kirsten IEER Flieger, Elisabeth IEER Hübener, Sabine R IV Flohr, Ralf L Hübner, Christine P Foders, Federico R I Husfeld, Angela R IV Franke, Inga R II Huß, Helga R I Freimuth, Britta L Hutzfeldt, Ingelore A Fromberg, Thorsten L Hutzfeldt, Rolf A Führmann, Karin L Führmann, Margitta R V Jokipii, Terhi P. Jung, Ingo A Gatzke, Gitta L Gebert, Dietmar IEER Kähler-Rust, Ursula L Gebühr, Christiane R IV Kamps, Christophe R V Gern, Klaus-Jürgen R V Kasch, Sabine A Gilbert, Jan A Kiesner, Christine IEER 118 Appendix

Kizys, Renatas P Lüth, Jan L Klein, Bernhard IEER Kleinert, Jörn R I Mähl, Joachim L Klenke, Sven A Maier, Sylvia A Klepper, Gernot R II Matthiesen-Goß, Silke R I Klodt, Henning R I Meier, Carsten-Patrick R V Knieling, Christa IEER Meyburg, Gertrud L Kirschning, Christopher L Michalski, Malgorzata L Kniep, Matthias L Michel, Joachim L Knoll, Matthias P Milewicz, Elisabeth IEER Kober, Gesine L Müller, Claudia A Koch-Klose, Abel L Mundhenke, Jens P Kock, Kai Thomas L Köller, Birte L Netzel, Jens R II Kopischke, Ralf A Nohns, Detlef L Koslowski, Anke L Nunnenkamp, Peter R IV Kramer, Paul J. IEER Krause, Hiltrud L Oelkers, Jens A Krawiec, Patryk L Oelkers, Martina A Krieger-Boden, Christiane R III Oskamp, Frank R V Kristahl, Karin P Osterwaldt, Birgit L Krüger, Cordula L Owe, Hannelore P Krüger, Nicole L Krupke, Wolfgang L Pahl-Scheller, Susanne L Kruse, Erich L Panneck, Bärbel A Kuhn, Annette R V Perlak, Ursula L Kumkar, Lars R III Peterson, Sonja R II Kunigk, Sytske L Pichler-Hoffmann, Verena A Künne, Sylvia IEER Pierdzioch, Christian P Kuzel, Jessica L Pisani, Donald S. L Prahl, Stephanie L Laaser, Claus-Friedrich R III Puls, Mathias B Lade, Kirsten R I Lage, Manfred L Raddatz, Roger IEER Langfeldt, Simone L Radke, Alina L Langhammer, Rolf J. R IV Rank, Michaela R IV Launstein, Bianca L Reese, Martina L Lawaetz, Ingrid R IV Reimers, Iris L Lay, Jann R II Richter, Wera A Lehment, Harmen IEER Roese, Solveig L Levenhagen, Ina L Rogge, Ingrid L Lewerenz, Werner IEER Rosenschon, Astrid R V Lipka, Regine L Rühle, Stefanie L Lösel, Christine L Rütz, Angelika IEER Lorenzen, Melanie L Ruhnke, Sibylle IEER Lücke, Matthias R IV Lüdemann, Heimke IEER Salden, Manfred IEER Staff 119

Sander, Birgit R V Thiele, Rainer R IV Sander, Kristina IEER Thode, Annegret L Schäfer, Andrea R III Thomsen, Horst L Schäfers, Susanne L Thun, Britta IEER Scheide, Joachim R V Tietze, Hans L Schertler, Andrea P Tobiesen, Helga L Schmidt, Rainer R V Treske, Volker IEER Schmidtke, Heinz L Türker, Sigrid R I Schnee, Elke L Schrader, Jörg-Volker R III Uhlig, Susann L Schrader, Klaus R I Schramm, Renate R III Vierth, Carola L Schröder, Gerlinde L Vinhas de Souza, Lúcio R IV Schröder, Hartmut L Schröder, Karin A Walter, Bärbel P Schulte, Itta IEER Wagner, Heiko A Schütz, Margrit R V Walsdorf, Anke P Schwarz, Karin IEER Walter, Daniela L Schweickert, Rainer R IV Wartenberg, Almut L Schwetlick, Heidrun L Wehrend, Norbert L Seeck, Christa IEER Weiland, Jan Behrend L Seusing, Ekkehart L Werner-Schwarz, Korinna IEER Sichelschmidt, Henning R III Weskamp, Wolfgang L Siedenburg, Florian R III Westphal, Frauke L Siefkes, Frauke L Wiebelt, Manfred R II Siegert, Olaf L Witt, Heidi L Simon, Ulf IEER Wlodek, Magdalena L Skerra, Helmut A Wöhler, Dagmar L Soltwedel, Rüdiger R III Wolf, Andrea L Spatz, Julius R IV Wolf, Hartmut R III Spinanger, Dean R IV Wolfrath, Birgit IEER Stark, Kerstin IEER Wortmann, Karin L Stegmann, Mirjam R II Wriedt, Michaela L Stehn, Jürgen R I Stolpe, Michael R I Yener, Serkan P Stolz, Stéphanie P Stribny, Dieter IEER Zacharias, Jakob L Stribny, Jutta R I Zan, Susanne L Süssenbach, Christina L Zarnic, Ziga R I Szypula, Ralph L Zarnitz, Monika L Zinke, Stephan L Theobald, Gudrun L

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