Alexander Fink

Institutionalized Bailouts and Fiscal Policy: Consequences of Soft Budget Constraints

States have soft budget constraints when they can expect a bailout by the federal government in the event of a financial crisis. This gives rise to incentives for unsound state fiscal policy. We test whether states with softer budget constraints have higher debt and deficits, receive more bailouts funds, spend funds less efficiently, and are more likely to allocate funds to programs benefiting special interests. Exogenous variation in soft budget constraints across states and over time allows the identification of budget constraint softness on state fiscal policy. We take advantage of the fact that in Germany, states’ political influence is exogenous because voting weights differ in the upper chamber of the German parliament. The stronger the political influence of states, the softer their budget constraints. We show that states with softer budget constraint have higher deficits and debts, and receive more bailouts funds. Further, overrepresented states are less efficient in spending public funds and are more prone to respond to rent seeking by interest groups.

U.S. Housing Prices and the Fukushima Nuclear Accident: To Update, or Not to Update, that is the Question

Did the nuclear catastrophe at Fukushima in March 2011 cause individuals to reappraise the risks they attach to nuclear power plants? We investigate the change in housing prices in the U.S. after the Fukushima event to test the hypothesis that house prices in the proximity of power plants fell due to an updated nuclear risk perception. Using a difference-in-differences approach we do not find evidence in support of the hypothesis that individuals reappraise the risks associated with nuclear power plants. House prices close to nuclear reactor sites did not fall relative to house prices at other locations in the U.S.

The Hanseatic League and the Concept of Functional Overlapping Competing Jurisdictions

I explore the medieval phenomenon of the Hanseatic League. I use the concept of functional overlapping competing jurisdictions (FOCJ) discussed by Frey and Eichenberger (1996, 1999, 2000) as framework for my analysis of the medieval association of northern European traders and cities. I show that the Hanseatic League came close to representing an example of a FOCJ. But I find that in contrast to the FOCJ outlined by Frey and Eichenberger the polycentric Hanseatic League as an inter-regional structure lacked the characteristic of a jurisdiction. It was not a political authority with the power to tax and regulate its members. The arrangements between the members of the Hanseatic League therefore had to be self-enforcing. Building on my investigation of the Hanseatic League, I further provide a general discussion of the costs and benefits of a central political authority in a system of functional overlapping competing units.

The Impact of Nobel Prize Winners in Economics: Mainline vs. Mainstream

We assess the impact of two groups of economists; mainline economists, who regard economics primarily as the science of exchange and mainstream economists, who perceive economics primarily as the science of choice. To control for scholarly quality we investigate the citation impact of Nobel Prize winning economists, who we break up into the two groups, mainline and mainstream. We find that over the period from 1970 to 2007 mainline economists had more of an impact than mainstream economists.

Kidnap insurance and its impact on kidnapping outcomes

In the developing world, kidnapping is relatively common, and a market for kidnap insurance has arisen in response. We provide a model that allows us to analyze how kidnap insurance will affect the interaction between the kidnapper and the victim’s family when both are self-interested and have complete knowledge. We find that a market for kidnap insurance can be supported because it benefits a risk averse family, as long as the introduction of insurance does not increase the risk of kidnapping too much. Families should fully insure if purchasing insurance does not increase the probability of kidnapping, and partially insure otherwise. Kidnapping insurance allows families to redeem hostages from kidnappers who are more willing to kill, which will reduce the number of kidnapping fatalities as long as the insurance does not increase the risk of kidnapping too much.

Free banking as an evolving system: The case of Switzerland reconsidered

Selgin and White (Economic Inquiry 25:439–457, 1987) argue that during its evolution a free banking system can be expected to reach certain stages of development. This paper uses their conceptual framework to investigate the free banking era in 19th century Switzerland and makes three contributions to the literature on free banking. First, I find that the development of the Swiss banking system closely matches the stylized evolutionary path depicted by Selgin and White. Second, I argue that after the introduction of the federal banknote law in 1882, the Swiss banking system can no longer be characterized as one of free banking. Third, I maintain that the evolutionary approach offered by Selgin and White opens the door to a better explanation of inter-bank note exchange complications during the 30 years preceding the introduction of a Swiss central bank in 1907 than alternative approaches.

Donations to Political Parties: Investing Corporations and Consuming Individuals?

Summary What motivates donations to political parties? Two views prevail. Donors are perceived either as ideologically motivated consumers or as privilege-seeking investors. To investigate differences in donor motivation between corporations and individuals, we analyze data from Germany. For the period from 1994 to 2014, we find that corporations act more like investors than individuals do. First, we test whether corporations or individuals are more inclined to give more to incumbent parties than to parties outside the governing coalition. Giving to incumbent parties whose representatives hold public offices may be more attractive for investing donors. Second, we test for differences between corporations and individuals in the relative increase in donations from non-election years to election years. Investor donations may be more volatile than consumer donations. We find that only corporations donate more to incumbent parties and that corporations increase their party donations from non-election years to election years more than individuals do. These differences in the behavior of corporate and individual donors provide some evidence for potentially undesirable exchanges between corporations as investors and parties. Further, the differences between individual and corporate donors tend to be more consistent for parties to the right on the political spectrum.

When Do Rulers Delegate Powers to Jurisdictions? The Independence of Medieval European Cities

During the Middle Ages European cities were to various degrees independent from their territorial rulers. This paper investigates the overlord’s decision making with regard to the independence of cities. I argue that in return for tax payments territorial rulers delegated the supervision of cities to groups – mostly merchants – that were better equipped to foster productive activities within the city limits. Merchants had superior knowledge to implement attractive rules for the settlement of conflicts and faced institutions that reduced the potential for public predation. I further argue that rulers of smaller territories, who faced relatively mobile subjects, tended to delegate more powers to cities. I provide evidence in support of my contentions from Western Europe during the high and late Middle Ages.