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Abstract

World banking systems are almost invariably populated by relatively diverse financial institutions. This paper studies the operation of credit markets where heterogeneous banks compete for investment projects of varying quality in the presence of informational asymmetries. We emphasize on two dimensions of heterogeneity – access to project-specific information vis-à-vis funding costs – which naturally reflect lenders’ comparative disadvantages in the competitive landscape. Two main findings stand out. First, competition across heterogeneous banks can produce multiple equilibria. Thus, economies with similar fundamentals may well display a variety of interest rates and/or market shares for the operating institutions. Second, market failures (overlending) always prove mitigated in heterogeneous banking systems, relative to a world with equally uninformed lenders. This discipline effect however comes with a chance for market fragility, whereby modest changes in the business environment or other fundamentals can trigger large shifts in the price of credit, leading to either highly selective markets or rather ones which overfund ventures of the lowest quality. Extensions of the basic model and some policy implications are also discussed.

Abstract

Career guidance assists students with the school-to-work transition. Based on a survey conducted in secondary schools in Germany, we analyze career guidance activities and how these affect career plans. The take-up of career guidance depends upon the school track attended, and the school and the class setting, while personal characteristics are barely relevant. The effects of counseling depend upon the type of counseling provider. Counseling by the employment agency reduces plans for educational upgrading and increases the probability of applying for an apprenticeship, while the effects of counseling by school counselors works in the opposite direction for lower track students.

Abstract

It has long been recognized that the presence of politicians on the boards of directors of public firms may create inefficiencies. Nevertheless, research has so far neglected the effect of political affiliation on the appointment of Members of Parliament to the boards of public firms. This article intends to fill this gap by conducting an empirical analysis on a sample of 945 deputies of the Italian Parliament elected over the period 1996–2001. Regression discontinuity estimates show that the centre-left coalition is about 25 percentage points more likely to appoint its Members of Parliament to the board of public enterprises than the centre-right coalition. Political appointments become more pronounced when the centre-left forms a governing coalition.

Abstract

This paper studies the distributional consequences of a systematic variation in expenditure shares and prices. Using European Union Household Budget Surveys and Harmonized Index of Consumer Prices data, we construct household-specific price indices and reveal the existence of a pro-rich inflation in Europe. Over the period 2001–15, the consumption bundles of the poorest deciles in 25 European countries have, on average, become 11.2 percentage points more expensive than those of the richest deciles. We find that ignoring the differential inflation across the distribution underestimates the change in the Gini (based on consumption expenditure) by almost up to 0.04 points. Cross-country heterogeneity in this change is large enough to alter the inequality ranking of numerous countries. The average inflation effect we detect is almost as large as the change in the standard Gini measure over the period of interest.

Abstract

When parties are risk-averse and therefore take out insurance, the efficiency of a tort rule depends on how well the insurance contracts govern incentives, risk allocation and transaction costs under the rule. This article presents two overlooked or discarded advantages of the rule of negligence over strict liability, which appear when insurance contracts are incomplete due to ex-ante transaction or ex-post verification costs. One advantage arises because of a legal impediment under strict liability: insurers cannot exempt coverage for all acts of simple negligence. Instead, the insurer must, at a cost, precisely specify each act for which coverage is excluded. Such specification can be prohibitively costly when there are many acts and many contingencies. These transaction costs, or the inefficient risk allocation associated with a deductible, are avoided under the negligence rule, where under idealized conditions the injurer can simply take due care and need not take out insurance. The other advantage of the negligence rule is that it provides incentives for the victim to bring forward information about the injurer’s acts. The victim has little incentive to convey such information under strict liability, whereas the victim’s insurer may elicit it, e. g. by not covering the victim’s loss fully.

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Zusammenfassung

Die Regierungskoalition hat sich jüngst auf einen Kompromiss zur Einführung einer Grundrente sowie zur Aufstockung der Grundsicherung im Alter verständigt. Während die Anhebung der Grundsicherung im Alter unter bestimmten Bedingungen tatsächlich zu einer Verbesserung der Einkommenssituation von (bedürftigen) Rentnern führt, gilt dies für die Grundrente nicht, denn wer bedürftig ist, erfährt hierdurch überhaupt keine Verbesserung seines Einkommens. Somit kommt die Grundrente im Ergebnis nur Personen zugute, die eben nicht als bedürftig gelten. Hinzu kommt, dass die beschlossenen Reformen diejenigen Personen, die aufgrund ihrer individuellen Erwerbsbiografie am ehesten von Altersarmut betroffen sind, wegen übersteigerter Anspruchsvoraussetzungen überhaupt nicht erreichen. Die Grundrentenpläne der Großen Koalition sollten daher, da sie wirkungslos und mit den Prinzipien der Rentenversicherung nicht vereinbar sind, besser nicht umgesetzt werden.

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