Copyright (c) 2008 All rights reserved. http://works.bepress.com/hans_gersbach Recent documents in Hans Gersbach en-us Thu, 03 Jan 2008 02:08:01 PST 3600 http://works.bepress.com/hans_gersbach/13 http://works.bepress.com/hans_gersbach/13 Sun, 11 Feb 2007 15:32:52 PST We examine how refunding emission taxes to firms dependent on market shares should be designed. While refunding is harmful under perfect competition, a first-best self-financing tax/tax-refunding scheme exists if the marginal damage from pollution exceeds the marginal distortion in an imperfectly competitive output market with symmetric firms. Under pre-investment in cleaner technology with short-term abatement opportunities, a first-best refunding scheme exists if pollution refunding can be made dependent on both market and investment shares. Hans Gersbach Climate Change and Environmental Policy http://works.bepress.com/hans_gersbach/12 http://works.bepress.com/hans_gersbach/12 Sun, 11 Feb 2007 15:16:09 PST We examine whether the central bank council of a monetary union should publish its voting records when members are appointed by national politicians. We show that the publication of voting records lowers overall welfare if the private benefits of holding office are sufficiently low. High private benefits of central bankers lower overall welfare under opacity, as they induce European central bankers to care more about being re-appointed than about beneficial policy outcomes. We show that opacity and low private benefits jointly guarantee the optimal welfare level. Moreover, we suggest that non-renewable terms for national central bankers and delegating the appointment of all council members to a European agency would be desirable. Hans Gersbach Transparency and Communication http://works.bepress.com/hans_gersbach/11 http://works.bepress.com/hans_gersbach/11 Sun, 11 Feb 2007 15:08:55 PST We examine wage bargaining in a two-sector economy when the employers and labor unions in each sector are not always aware of all the general equilibrium feedback effects. We show analytically that if agents only consider labor demand effects, low real wages and low unemployment are the result. With an intermediate view, i.e., when partial equilibrium effects within a sector are taken into account, high real wages and unemployment result. If all general equilibrium effects are simultaneously considered, we once again obtain a situation of low wages and unemployment. The assumption that unions and employers' federations are unable to incorporate all feedback effects from other sectors may explain why unemployment in Europe is high. Hans Gersbach General Equilibrium Theory http://works.bepress.com/hans_gersbach/10 http://works.bepress.com/hans_gersbach/10 Sun, 11 Feb 2007 15:03:40 PST We examine the optimal allocation of equity and debt across banks and industrial firms when both are faced with incentive problems and firms borrow from banks. Increasing bank equity mitigates the bank-level moral hazard but may exacerbate the firm-level moral hazard due to the dilution of firm equity. Competition among banks does not result in a socially efficient level of equity. Imposing capital requirements on banks leads to the socially optimal capital structure of the economy in the sense of maximizing aggregate output. Such capital regulation is second-best and must balance three costs: excessive risk-taking of banks, credit restrictions banks impose on firms with low equity, and credit restrictions due to high loan interest rates. Hans Gersbach Banking and the Macroeconomy http://works.bepress.com/hans_gersbach/9 http://works.bepress.com/hans_gersbach/9 Sun, 11 Feb 2007 15:00:02 PST We present a new approach to endogenizing technological spillovers. Firms choose continuous levels of a cost-reducing innovation before they engage in competition for each other's R&D-employees. Successful bids for the competitor's employee then result in higher levels of cost-reduction. Finally, firms enter product market competition. We apply the approach to the long-standing debate on the effects of the mode of competition on innovation incentives. We show that incentives to acquire spillovers are stronger and incentives to prevent spillovers are weaker under quantity competition than under price competition. As a result, for a wide range of parameters, price competition gives stronger innovation incentives than quantity competition. Hans Gersbach Innovation and Spillovers http://works.bepress.com/hans_gersbach/8 http://works.bepress.com/hans_gersbach/8 Sun, 11 Feb 2007 14:42:14 PST We consider a general equilibrium model where groups operating in a competitive market environment can have several members and make efficient collective consumption decisions. Individuals have the option to leave the group and make it on their own or join another group. We study the effect of these outside options on group formation, group stability, equilibrium existence, and equilibrium efficiency. Hans Gersbach General Equilibrium Theory http://works.bepress.com/hans_gersbach/7 http://works.bepress.com/hans_gersbach/7 Sun, 11 Feb 2007 14:34:32 PST Collective consumption decisions taken by the members of a household may prove inefficient. The impact on market performance depends on whether household inefficiencies are caused by inefficient net trades with the market or by inefficient distribution of resources within households. Inefficient internal distribution always results in inefficient equilibrium allocations. This leads us to consider competitive forces as a disciplinary device for households. Competition of households for both resources and members can eliminate or reduce inefficient internal distribution. Hans Gersbach General Equilibrium Theory http://works.bepress.com/hans_gersbach/5 http://works.bepress.com/hans_gersbach/5 Sun, 11 Feb 2007 14:13:45 PST This paper studies the formation of human capital and its transmission across generations when premature adult mortality is a salient feature of the demographic landscape, either permanently or in the form of a long-period wave that follows the outbreak of an epidemic. We establish several threshold properties of the model, for such a shock can severely retard economic growth, even to the point of leading to an economic collapse. Premature adult mortality may exacerbate inequality under nuclear family arrangements. Pooling mortality risks with equal treatment of all children may fend off, or even induce, a collapse, depending on the initial conditions and the size and duration of the shock. Awareness campaigns may also trigger a collapse by introducing an undesirable expectational feedback. Hans Gersbach Epidemic Diseases, Poverty and Political Institutions http://works.bepress.com/hans_gersbach/4 http://works.bepress.com/hans_gersbach/4 Sun, 11 Feb 2007 14:08:07 PST We develop democratic mechanisms where individual utilities are not observable by other people at the legislative stage. We show that an appropriate combination of three rules can yield efficient provision of public projects: first, flexible and double majority rules where the size of the majority depends on the proposal and verifiable parameters and taxed and non-taxed individuals need to support the proposal; second, flexible agenda costs where the agenda-setter has to pay a certain amount of money if his proposal does not generate enough supporting votes; third, a ban on subsidies. We provide a rationale why double majority rules are used in practice. We also show that higher degrees of uncertainty about project parameters can make it easier to achieve first-best allocations and that universal equal treatment with regard to taxation is undesirable. Hans Gersbach Design of New Organizations/Institutions http://works.bepress.com/hans_gersbach/3 http://works.bepress.com/hans_gersbach/3 Sun, 11 Feb 2007 14:01:21 PST As the performance of long-term projects is not observable in the short run politicians may pander to public opinion. To solve this problem, we propose a triple mechanism involving political information markets, reelection threshold contracts, and democratic elections. An information market is used to predict the long-term performance of a policy, while threshold contracts stipulate a price level on the political information market that a politician must reach to have the right to stand for reelection. Reelection thresholds are offered by politicians during campaigns. We show that, on balance, the triple mechanism increases social welfare. Hans Gersbach Design of New Organizations/Institutions