ISBN: 354043254-x
AUTHOR: Zimmermann, K.F.
TITLE: Frontiers in Economics
TOC:

Foreword V
1 Monetary Theory, Monetary Policy, and Financial Markets 1
1.1 Introduction 1
1.2 Modeling the Transmission of Monetary Impulses 2
1.2.1 Money in Dynamically Optimizing General Equilibrium Models 2
1.2.2 The Credit Channel of Monetary Transmission 5
1.2.3 Empirical Evidence From Vector Autoregressions 7
1.2.3.1 Evidence on the Liquidity Effect 8
1.2.3.2 Evidence on the Credit Channel 9
1.3 Design of Monetary Policy 10
1.3.1 Monetary Policy Institutions 10
1.3.1.1 Time-consistency and Credibility of Monetary Policy 10
1.3.1.2 Central Bank Independence 11
1.3.1.3 Optimal Contracts for Central Bankers 13
1.3.2 Monetary Policy Strategies and Intermediate Targets 14
1.3.2.1 Monetary Targeting 15
1.3.2.2 Inflation Targeting 16
1.3.2.3 Taylor Rules 16
1.4 Monetary Stability and Financial Stability 17
1.4.1 Financial Integration and Financial Stability 18
1.4.2 Microeconomic Aspects: Financial Market Regulation 19
1.4.2.1 The Traditional Approach to Financial Regulation 19
1.4.2.2 New Regulatory Approaches 20
1.4.3 Macroeconomic Aspects: Currency and Financial Crises 22
1.4.3.1 Theoretical Models of Currency Crises 22
1.4.3.2 Empirical Studies 24
1.4.4 New International Financial Architecture 25
1.5 Conclusions 26
2 Public Economics 37
2.1 Introduction 37
2.2 Unemployment and Taxation 38
2.2.1 Efficiency Wage Models 39
2.2.2 Trade Union Wage Setting 42
2.2.3 Some Empirical Evidence 45
2.2.4 Relevance And Consequences 48
2.3 Public Pension Reform 51
2.3.1 Pay-As-You-Go Versus Capital Funded Pension Systems - And a Misunderstanding 52
2.3.2 Is a Pareto-superior Transition From PAYG to FS Possible? 54
2.3.3 Pension Reform and Intergenerational Redistribution 58
2.3.4 Relevance and Consequences 65
2.4  Reform of Capital Income Taxation in Europe 66
2.4.1 Problems of Capital Income Taxation 68
2.4.2 Reform Models for Capital Income Taxation 72
2.4.3 Relevance and Consequences 79
2.5 Summary 83
3 Labor Economics 95
3.1  Introduction 95
3.2 Theoretical Concepts 96
3.2.1 Determinants of the Global Economy 97
3.2.1.1 Trade as a Cause of Crisis 97
3.2.1.2 Capital Flight 98
3.2.1.3 Immigration 98
3.2.2 Political Abstinence 98
3.2.2.1 Political Incompetence 
3.2.2.2 Natural Unemployment 99
3.2.2.3 Rational Expectations 99
3.2.2.4 Intertemporal Substitution 100
3.2.2.5 Real Business Cycle 100
3.2.3 Management of Employment Through Global Control 100
3.2.3.1 Keynesianism 101
3.2.3.2 Rigid Wage and Price Mechanisms 102
3.2.3.3 Money Illusion and Adaptive Expectations 102
3.2.4 Supply-Oriented Theories of Employment 103
3.2.4.1 Supply-Side Economics 103
3.2.4.2 Determinants of Economic Growth 104
3.2.5 Institutions and Sectors 105
3.2.5.1 Structural Change 105
3.2.5.2 Wage Determination and Wage Rigidities 105
3.2.5.3 Hysteresis 106
3.2.5.4 The Role of the Welfare State 107
3.2.6 Assessment 107
3.3 Frontiers of Labor Research 108
3.3.1 Topical Issues 109
3.3.1.1 The Limits of the Neoclassical Approach to the Labor Market 109
3.3.1.2 Minimum Wages 110
3.3.1.3 The "Third Sector" as an Alternative to Paid Work 110
3.3.2 Methodological Developments 111
3.3.2.1 Current Situation and Potential 111
3.3.2.2 Recent Methods and Research Strategies 122
3.3.2.3 Data, Evaluation, and Comparative Analysis 113
3.3.3 Information and Communication Technology 114
3.3.4 Low-Wage Sector 117
3.3.5 Methodology of Program Evaluation 118
3.3.6 Assessment 120
3.4 Research Requirements for Policy Advice 120
4 Institutions and Transformation - Possible Policy Implications of the New Institutional Economics 127
4.1 Introduction 127
4.2 Theory 128
4.2.1 Development of the NIE 128
4.2.2 Basic assumptions 129
4.2.3 Institutions 131
4.2.4 Central research topics 134
4.2.5 Core hypotheses 138
4.3 Empirical Insights 139
4.3.1 Methodological questions 140
4.3.2 Empirical evidence 143
4.4 Institutions and Transformation 150
4.4.1 Institutions and transformation: the traditional view 151
4.1.2 Institutions and transformation: The view of NIE 159
4.1.2.1 Initial conditions, path and results of transition: institutions matter 159
4.1.2.2 External and internal institutions: relevance and relationship 162
4.1.3 Final remarks 168
4.5 Data Desiderata 170
4.6 Policy Implications 172
4.7 Conclusions and Outlook 175
5 Antitrust and Regulation - The View of New Institutional Economics 185
5.1 Introduction 185
5.2 New Institutional Economics of Antitrust and Regulation: Methodological Issues 186
5.2.1 Basic analytical concepts of New Institutional Economics 186
5.2.2 Implications for industrial organization 189
5.2.3 Implications for antitrust and regulation 192
5.2.3.l Substantive provisions and rules 194
5.2.3.2 Governance of antitrust and regulation 202
5.3 Selected Current Issues in Antitrust and Regulation 206
5.3.1 Vertical restraints in European antitrust law 206
5.3.2 Regulation in traditional network industries - the case of the electricity industry 213
5.3.3 The allocation of regulatory competencies in the EU: Federal aspects 216
5.4 Research Needs and Implications for Economic Policy Making and Economic Policy Advice 225
6 Economics of Networks 235
6.1 Why Economics of Networks? 235
6.2 The Agenda of Network Economics in Economic Theory 236
6.2.1 Real and virtual networks 240
6.2.2 Network licensing 240
6.2.3 Network externalities and lock-in effects 241
6.2.4 From historical to managed lock-in 242
6.2.5 Regulatory issues on networks 243
6.2.5.1 Regulatory issues concerning virtual networks 244
6.2.5.2 Standardization policy 244
6.2.5.3 Innovation externalities and intellectual property rights 245
6.2.5.4 Assignment of property rights when innovation externalities are present 246
6.2.6 Networks and asymmetric information 247
6.2.7 Network stability, volatility, and stabilization policy 248
6.3 Current Demand for Research with Significant Implications for Policy Institutions 250
6.3.1 Networks of Information and Communication 251
6.3.2 Challenges for economic policy advice 254
6.3.3 Competition policy and market regulation 254
6.3.4 Merger and acquisition control 256
6.3.5 Globalization and technological convergence 258
6.3.6 Technology and industrial policy issues 260
6.3.7 Enhancing the information base 260
7 Growth, Structural Change, and Employment 269
7.1 Introduction 269
7.2 New Developments in Growth Theory 270
7.3 Convergence Processes and the Catching-Up Hypothesis 273
7.4 Social Conflicts, Income Distribution, and Growth 276
7.5 Technological Change, Structural Change, and Employment 279
7.6 Beyond Intersectoral Change - Market-Driven Restructuring of Corporations 282
7.7 Growth and Employment Implications of the New Information and Communications Technologies 285
7.8 Industrial Policy Concepts 289
7.9 Growth-Policy Goals of EU Countries at the Beginning of the New Millennium 302
8 Economics of the Personal Distribution of Income 311
8.1 Introduction 311
8.2 Describing the Personal Distribution of Income 313
8.2.1 Problems of Defining and Measuring Income 313
8.2.1.1 Conceptual Problems 313
8.2.1.2 Measures of Inequality 316
8.2.1.3 Income poverty as a special problem of the personal distribution of income 322
8.2.2 Subjective Measures of "Income Satisfaction" and "Life Satisfaction" 324
8.2.3 Availability of Data 327
8.2.4 Selected Descriptive Results for Germany 331
8.2.4.1 Trends of income inequality and income poverty 331
8.2.4;2 Income mobility 332
8.3 Explaining the Personal Distribution of Income and Income Mobility 336
8.3.1 Overview of Determinants of the Personal Distribution of Market Incomes across Recipients 336
8.3.2 Overview of Determinants of the Personal Distribution of Disposable Income and of Net Equivalent Income across Individuals 340
8.3.3 Decomposition Methods and Results 342
8.3.4 Comparison of Pre-government and Post-government Income as an Analytical Tool 346
8.3.5 Explaining Income Mobility 349
8.3.6 Income as a Determinant of Spending, Saving, Investment and Labor Behavior 350
8.4 Evaluating the Personal Distribution of Income 351
8.4.1 Theories of a "Just" Distribution of Income 352
8.4.2 Measuring Equality of Opportunity 354
8.4.3 Measuring Attitudes toward Income Inequality 355 
8.5 Policy Instruments for Influencing the Personal Distribution of Income 355
8.6 Summary and Recommendations 356
8.6.1 State of Research 356
8.6.2 Further Development of Theory and Methods 357
8.6.3 Further Development of Empirical Research 357
9 Game Theory and Experimental Economics 371
9.1 Introduction 371
9.1.1 Game theory 371
9.1.1.1 Characteristics and possibilities of game theory 372
9.1.1.2 Basic principles of game theory 373
9.1.2 Experimental economics 376
9.1.2.1 The experimental method 376
9.1.2.2 The possibilities of experimental economics 377
9.2 Applications of Game Theory and Experimental Economics 378
9.2.1 Market games 378
9.2.1.1 Market entry 378
9.2.1.2 Price war induced by innovation 384
9.2.2 Political decision-making processes 389
9.2.2.1 Budget processes 390
9.2.2.2 A voting model based on game theory 391
9.2.2.3 Experimental studies 394
9.2.3 Evolutionary game theory 395
9.2.3.1 Corporate cultures 395
9.2.3.2 An evolutionary explanation 396
9.2.4 Contract theory 401
9.2.5 Auctions 404
9.2.5.1 A short introduction to auction theory 404
9.2.5.2 Selling spectrum rights 406
9.2.5.3 Awarding mobile communication licenses in Germany 407
9.2.5.4 Recommendations for further license auctions 408
9.2.6 Environmental politics 409
9.2.6.1 The environmental problem from an economic point of view 409
9.2.6.2 
The analysis of the environmental problem based on game theory 410
9.2.6.3 Experimental research 414
9.2.6.4 Consequences for environmental policy 414
9.3 Conclusion 415
9.3.1 Summary 415
9.3.2 Recommendations and needs for further research 416
10 Summary and Recommendations 421
10.1 Introduction 421
10.2 New developments in economics: A summary 421
10.2.1 The individual fields of research 421
10.2.1.1 Monetary economics, monetary policy and financial markets (J. von Hagen, B. Hayo and I. Fender) 421
10.2.1.2 Public Finance (S. Bach and W. Wiegard) 423
10.2.1.3 Labour economics (K. F. Zimmermann and G. G. Wagner) 426
10.2.1.4 Institutions and Transformation - Possible policy implications of New Institutional Economics (H. Engerer and S. Voigt) 429
10.2.1.5 Competition Policy and Regulation-The view of New Institutional Economics (F. Bickenbach, L. Kumkar, and R. Soltwedel) 431
10.2.1.6 Networks Economics (G. Erber and H. Hagemann) 436
10.2.1.7 Growth, Structural Change and Employment (G. Erber and H. Hagemann) 439
10.2.1.8 Personal income distribution (R. Hauser and G. G. Wagner) 442
10.2.1.9 Game Theory and Experimental Economics (S. Berninghaus, K. M. Ehrhart, A. Kirstein and S. Seifert) 445
10.2.2 Selected Research Projects 449
10.2.2.1 Theoretical and Methodical Studies 449
10.2.2.2 Statistical Recording 451
10.3 Economic Research and Advice: Fourteen Theses and Recommendations 452
10.3.1 Economic Teaching and Research: Strengthening Methodical Competence 453
10.3.2 Organisation of the Statistical Infrastructure: Closer Alignment with Science 456
10.3.3 Universities and Economic Research Institutes: Co-operation and Competition 457
10.3.4 Organisation of policy advice: More plurality and transparency 459
List of Tables 463
List of Figures 465
List of Authors 467
Subject Index 471
END