This paper employs event study methods to evaluate the effects of ECB’s non-standard monetary policy program announcements on 10-year government bond yields of 11 euro area member states. Measurable effects of announcements arise with a one-day delay meaning that government bond markets take some time to react to ECB announcements. The country-specific extent of yield reduction seems inversely related to the solvency rating of the corresponding countries. The spread between core and periphery countries reduces because of a stronger decrease in the latter. This result is confirmed by letting the announcement variable interact with the current spread level.
The diminishing importance of retail investors and the institutionalization of markets are arguably a result of the general perception that individuals are not well informed and, hence, are better off using professional services (Davis, ). However, this paper provides evidence supporting the opposite. Using a global sample, we examine whether retail trading is informative around the world. Overall, retail investors are documented to enhance price efficiency by trading in the same direction as permanent price changes, contributing 24.8 % to price discovery, and accelerating the information from both scheduled and unscheduled news to be impounded into prices.
The career mobility model suggests that overeducated workers are more prone to take up on-the-job training, to climb up the career ladder, or to leave to professions more suitable to their educational level. Our empirical analysis, using the German SOEP, confirms this theory for Germany. Comparing adequately qualified and overqualified workers in jobs that require the same level of formal qualification indicates that overeducated workers have a higher probability to take up on-the-job training and have a higher probability to move to jobs that better match their educational level. Furthermore, we find that overeducated workers experience higher wage growth than their adequately educated colleagues.
It is believed that if there is no informational asymmetry between firms and the government, firms could be remunerated for innovation using optimal taxation rather than patents. We show that under reasonable conditions (such as the government’s inability to customise the tax rate for each firm), patent protection is preferable to a tax/subsidy scheme if the marginal costs of the imitators are sufficiently higher than that of the innovator. Otherwise, the tax/subsidy scheme is preferable. These results hold under Cournot and Bertrand competition with product differentiation, but not for the case of Bertrand competition with homogeneous products. We rationalise these findings as the results of a trade-off between the distortions induced by monopoly under patents and production inefficiency under the tax/subsidy scheme.
Most equivalence scales that are applied in research on inequality do not depend on income, even though there is strong empirical evidence that equivalence scales are actually income-dependent. This paper explores the consistency of results derived from income-independent and income-dependent scales. We show that applying income-independent scales when income-dependent scales would be appropriate leads to violations of the transfer principle. Surprisingly, there are some exceptions, but these require unrealistic and strong assumptions. Thus, the use of income-dependent equivalence scales almost always leads to different assessments of inequality than the use of income-independent equivalence scales. Two examples illustrate our findings.
We assess whether the partisanship of local councils affects the level and composition of local public spending by German municipalities. Our identification strategy exploits changes in the party with the absolute majority in the local council, combining an instrumental variable strategy with a matching approach to address potential selection into treatment. We find evidence for strong partisan effects: Communities with a left-wing council majority spend more on ‘people-oriented’ public goods and less on infrastructure than communities with a right-wing dominated council.