Marcel Thum

Market Structure and the Timing of Technology Adoption with Network Externalities

The paper shows that in the presence of network externalities, consumers adopt conventional technologies too early; the waiting option for a newly emerging technology is not exercised enough. This problem is aggravated when the new technology is provided by a single producer with market power because any positive value created via waiting by current consumers will be ex post appropriated by the monopolist. Therefore, the monopolist´s power to extract surplus operates against his own interests in this dynamic setting. The paper also shows how the producer of a new technology can partially overcome the problem of too little waiting by using licensing as a commitment device.

Public pensions and immigration policy in a democracy

The paper analyzes the link between the public pension system and the immigration policy. In a pay-as-you-go system, the incentives for immigration vary significantly between individuals at different lifetime periods. In the framework of an overlapping generations model, we show that the median voters choice in general leads to inefficient levels of immigration. The median voter neglects the effects of the externalities within the pension system on other generations. An immigration policy that is not affected by the median voters choice but instead is constitutionally determined will avoid welfare losses. The expected lifetime income of each generation can be increased by applying a rule of steady immigration.

Demographic Change and Bank Profitability - Empirical Evidence from German Savings Banks

Most European economies will experience significant demographic changes in the decades ahead. Due to low birth rates, populations are shrinking and ageing at the same time. This article explores the impact of demographic change on the banking industry. A unique data set, which contains detailed information on almost 2.5 million accounts in 11 German savings banks, allows us estimating the socio-demographic determinants of retail profitability. Using a simulation model, we predict the development of bank profitability resulting from demographic shifts through 2025. Our central finding is that the effects of population ageing will partially offset the impact of shrinking customer bases. While the decline in the size of the population reduces the customer base, ageing increases profitability per se, as older customers typically generate higher profits for their banks.

Immigration and Skill Formation in Unionised Labour Markets

This paper analyses the impact of immigration on the welfare of the native population in an economy that consists of skilled and unskilled workers. Due to unionisation, the wage rate in the market for unskilled labour is above the competitive level. For a given skill endowment of the native population, we show that immigration reduces the welfare of the host country up to a certain threshold and then increases it with further immigration. For the case of endogenous skill formation, an increase in expected immigration raises the number of skilled individuals in the native population. If the government can credibly commit itself to a certain immigration policy, skill formation of the native population will adjust, so that immigration maybe strictly welfare increasing.

Welfare Effects Of Immigration In A Dual Labor Market

The paper analyses the welfare effects of immigration when some sectors of the economy are characterized by wage bargaining between unions and employers. We show that immigration is unambiguously beneficial if the wage elasticity of labor demand in the competitive sectors is smaller than in the unionised sectors. In the opposite case, the welfare effect of immigrat ion is ambiguous; little immigration then reduces the native populations welfare, whereas large scale immigration tends to enhance welfare.

Network externalities, technological progress, and the competition of market contracts

Abstract Network externalities are used to describe the fact that many modern products become more valuable the more users adopt products of the same technology. Where network externalities and technological progress exist, the various kinds of inefficiencies discussed in the recent literature can be explained by different types of contracts. The main categories analysed are simple market contracts, update contracts, and service contracts. It is shown that these types of contract emerge endogenously from the incentive structure of profit-maximizing firms. Competition between these contracts may substantially reduce inefficient allocations caused by network externalities.

Implizite Einkommensteuer als Messlatte für die aktuellen Rentenreformvorschläge

Abstract The rate of return in a PAYG pension system is typically lower than in a funded system. This lower rate of return generates a loss for the contributors which basically acts like an implicit income tax. In this paper, we argue that the implicit income tax is an excellent measure with which to evaluate the upcoming pension crisis in Germany and that it is also much better suited than other measures (such as the contribution rate, the pension level or the rate of return) to understand the impact of various reform scenarios. We also calculate the development of the implicit tax for prominent reform proposals in Germany.

Too much conformity? A Hotelling model of local public goods supply

Abstract This paper considers a new dimension in the choice of local public goods: quality. The quality decision that is made by median voters in a Hotelling model of product differentiation leads to too much conformity from a welfare point of view.

Investing in Terra Incognita: Waiting and Learning

This paper analyzes informational aspects linked with foreign direct investment in economies that just open up to foreign investors and steer towards a market economy. From the viewpoint of foreign firms, such economies are still terra incognita as far as economic and practical conditions for setting up foreign direct investment are concerned. The best way to obtain relevant information is via the experiences from other investment projects. In this situation waiting may be advantageous for the firms, given that sunk costs have to be incurred in connection with investment and the investment decision can be postponed. However, since every investor provides a positive informational externality, this waiting is harmful for the investment process and for the economies themselves. Economic policies to correct the externality problem may thus be justified.

Controlling Migration in an Open Labor Market

A direct immigration policy is no longer feasiblefor a single region in a common labor market. Within apolitical economy approach, this paper focuses on the question ofwhether migration can be controlled through the composition ofgovernment expenditures. Taking into account both capital and laborincome, it turns out that the median voters income is U-shaped in thenumber of immigrants. Therefore, the government can eitherprovide less of the goods preferred by foreigners in order to minimizeimmigration or carry out an active immigration policy byshifting its expenditures towards those publicly provided goods. Thepaper identifies the factors that determine the governmentschoice between the two strategies.