This paper explores the role that misdirected bank lending played in prolonging the Japanese macroeconomic stagnation that began in the early 1990s. The investigation focuses on the wide spread practice of Japanese banks of continuing to lend to otherwise insolvent firms. We docu ment the prevalence of this forbearance lending and show its distorting effects on healthy firms that were competing with the impaired firms. The paper by Hoshi (2000) was the first to call attention to this phenomenon, and its ramifi

/pdf/zombie-lending-and-depressed-restructuring-in-japan-3rnedjuzek.pdf

Zombie Lending and Depressed Restructuring in Japan

Modern growth theory puts invention on the center stage. Inventions are created by individuals, raising the question of whether we can increase the number of inventors. To answer this question, we study the causal effect of MSc engineering education on invention, using data on U.S. patents’ Finnish inventors and the distance to the nearest technical university as an instrument. We find a positive effect of engineering education on the propensity to patent and a negative OLS bias. Our counterfactual calculation suggests that establishing three new technical universities resulted in a 20% increase in the number of USPTO patents by Finnish inventors.

/pdf/education-and-invention-1sojdnjlcu.pdf

Education and invention

This study analyzes the qualitative aspects of emigration from Germany taking account of economic and non-economic reasons. The reported willingness to emigrate from Germany in the German Socio-Economic Panel (GSOEP) is explained for men and women by three groups of variables: individual characteristics, household characteristics, and regional characteristics. It turns out that the educational background and West German residency positively affect the willingness to emigrate, whereas German nationality, age, and the family situation are mostly negatively correlated with it.

To Go or Not to Go: Emigration from Germany

The study focuses on the role of deposit banks in the makings of the Finnish credit cycle of 1986-1995.A preliminary descriptive analysis suggests that banks' credit supply had a positive effect on credit growth in the boom period and a negative effect in the early 1990s.There are furthermore some indications that moral hazard of weak banks played a role in the expansion phase and that insuffient capital constrained lending later on, thus causing a credit crunch. A theoretical model set up here suggests that one should examine the effects of both bank capital and costs on lending and also look at the issuance of subordinated debt as a means of testing the moral hazard and credit crunch hypotheses. An empirical analysis of the behaviour of 483 cooperative and savings banks over the second half of the 1980s gives strong support to the moral hazard hypothesis.In particular, the aggregate credit supply of the savings banks would have been substantially less if their capital had been high enough to eliminate moral hazard incentives. By contrast, almost no evidence of a credit crunch induced by weak bank capital is found in an analysis of 313 cooperative and savings bank in 1991 and 1992.Instead the effects of borrower creditworthiness and credit demand are underlined. Keywords: credit crunch, moral hazard, capital regulation, banking crisis

Banks and the Finnish credit cycle 1986-1995

We trace the impact of formative experiences on portfolio choice. Plausibly exogenous variation in workers’ exposure to a depression allows us to identify the effects and a new estimation approach makes addressing wealth and income effects possible. We find that adversely affected workers are less likely to invest in risky assets. This result is robust to a number of control variables and it holds for individuals whose income, employment, and wealth were unaffected. The effects travel through social networks: individuals whose neighbors and family members experienced adverse circumstances also avoid risky investments.

/pdf/formative-experiences-and-portfolio-choice-evidence-from-the-5b50ejqr29.pdf

Formative Experiences and Portfolio Choice: Evidence from the Finnish Great Depression

Introduction, Executive Summary, Chapter 1: The European Economy: Current Situation and Economic Outlook for 2005, Chapter 2: Outsourcing, Chapter 3: Longer Working Hours - the Beginning of a new Trend?, Chapter 4: Pensions and Children, Chapter 5: House Prices in Europe, Authors: The Members of the European Economic Advisory Group at CESifo

EEAG European Economic Advisory Group at CESifo: Report on the European Economy 2005

Das ifo Institut empfiehlt eine Absenkung der deutschen Unternehmensteuersatze, da diese im internationalen Vergleich derzeit eine einsame Spitzenstellung einnehmen. Daruber hinaus wird ein Stufentarif bei der Einkommensteuer vorgeschlagen, um die Grenzbelastung aller Einkommensbezieher deutlich zu senken und um eine erhebliche Vereinfachung zu erreichen. Es soll nur noch drei Steuersatze und drei Einkommensklassen geben.Die erste Klasse, in der der Steuersatz 20% betragt, beginnt beim Existenzminimum und endet bei 35 000 DM. In der zweiten Klasse liegt der Grenzsteuersatz bei 30%, sie endet mit einem Einkommen von 70 000 DM. In der danach folgenden dritten Klasse, die nach oben hin nicht begrenzt ist, liegt der Grenzsteuersatz bei 40%.

ifo Vorschlag zur Steuerreform

The Importance of Human Capital

The Members of the European Economic Advisory Group at CESifo 2003

The Members of the European Economic Advisory Group at CESifo 2002

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