Publications

In this model of education, where individuals are exposed both to educational risk and to wage risk within the skilled sector, successful graduation depends both on individual effort to study and on public resources. We show that insuring the present risks is a dichotomic task: Wage risk is diversified ex post among the skilled by graduate taxation and skill-specific tuition fees. Educational risk of failure and inequality between skilled and unskilled workers are mitigated ex ante by enhancing the quality of education. The necessary expenditures are optimally financed by regressive tuition fees and the net revenue from the graduate tax.

The question to what extent governance structure affects people s well-being, here reflected in the decision to commit suicide, remains still largely unknown. This paper examines the effects of political institutions and governance structure on suicide using a balanced panel for 26 Swiss states (cantons) over the period 1980 1998. Our results indicate that stronger popular rights and more fiscal decentralization reduce suicide, while more local autonomy increases it. The effects are not strongly gender-specific. However, we find evidence that the effect of direct legislation is partly transmitted through sub-federal budgets, but not through health sector spending exclusively.

We investigate the return decision of foreign students from developing countries who graduated in Germany and received support from a scholarship institution. Controlling for the impact of economic, political and institutional determinants, we find that individual factors in particular age and time spent in the host country have a crucial impact on the return decision. Better integrated students have lower propensities to return to their home countries after graduation. Scholarship institutions which want their students to return might, thus, consider personal characteristics like age or family status when they select their students. Also provisions for scholarship receipt should be scrutinised. Some provisions for scholarship receipt, for example time restrictions or age limits, lead to increased return rates. We further investigate the impact of cultural differences between home and host country on the return decision. Especially graduates from Africa and Asia seem to consider cultural differences when deciding whether to return or not.

Using a panel of international student test scores, 1980 2000, panel fixed effects estimates suggest that government spending decentralization is conducive to student performance. The effect does not appear to be mediated through levels of, or decentralization in, educational spending.

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dc.contributor.author: Hopp, Christian

This paper develops an endogenous timing model for a quantity-setting duopoly with imperfect information on market demand and costly market research. If the market research cost K is too high, market research never plays a role. For intermediate values of K, and independently of production costs, there are two SPNE with endogenous leadership. If K is low, SPNE with endogenous leadership appear if the production costs of the leader are low enough relative to market conditions (e.g. large expected market capacity and small variance thereof). If both firms are relatively inefficient, there is a SPNE with simultaneous production.

We develop a model of education where individuals face educational risk. Successfully entering the skilled labor sector depends on individual effort in education and public resources, but educational risk still causes (income) inequality. We show that an optimal public policy consists of deferred skill-specific tuition fees, lump-sum transfers/taxes, and public funding of the educational sector. We argue that improved educational opportunities matter more than direct income transfers in a Second-best setting. Contrary to standard models of income risk, it is not optimal to use a proportional wage tax, because combining skill-specific tuition fees and public education spending provide both insurance and redistribution at lower costs. A wage tax is only optimal if skill-specific tuition fees are not available.

In this paper we study the determinants of citizens trust in the European Central Bank during the start-up phase from 1999-2004. Using a country panel based on the Eurobarometer survey, we find that higher inflation rates reduce trust. Thus people appear to evaluate the performance of the ECB on the basis of its success in achieving its primary objective, namely price stability. However, national income also has a strong impact, which poses a dilemma to the ECB, as it cannot increase economic growth in the long run. Unemployment does not have a significant impact on trust in the ECB, while unemployment spending exerts a trust-building impact. Possibly, automatic stabilizers serve as substitutes for ECB interventions, which would lower people s trust. Interestingly, active labor market policies, which can be interpreted as proxies for the public s perception of the urgency of the problem of high unemployment, tend to decrease trust.

Using panel data for a maximum of 109 countries over the years 1976-2000, we empirically analyze the impact of decentralization on the occurrence of transnational terror. Our results show that expenditure decentralization robustly reduces the number of terror events in a country, while political decentralization has no impact. The effects of decentralization do not transmit through government efficiency and effectiveness, in line with the system stability hypothesis of Frey and Luechinger (2004).

The euro area has experienced a sustained decline in labour productivity growth since the 1980s. In the economic literature this phenomenon is commonly explained by a decline in capital deepening and lower total factor productivity (TFP) growth. However, the decline in labour productivity growth might partly also reflect a lower contribution of labour quality growth. We present evidence of changes in human capital in a number of euro area countries based on a fixed-weight index for labour quality growth for both the employed population and the labour force. We then evaluate the significance of these changes for recent developments in productivity growth. Our findings suggest that euro area labour quality has indeed moderated towards the end of the 1990’s, but the impact on labour productivity growth is small compared to the overall decline in capital deepening and total factor productivity growth.