Author Archives: Dirk Niepelt

“Economic and Politico-Economic Equivalence,” CEPR, 2012

CEPR Discussion Paper 9203, November 2012, with Martín Gonzalez-Eiras. PDF.

We extend “economic equivalence” results, like the Ricardian equivalence proposition, to the political sphere where policy is chosen sequentially. We derive conditions under which a policy regime (summarizing admissible policy choices in every period) and a state are “politico-economically equivalent” to another such pair, in the sense that both pairs give rise to the same equilibrium allocation. The equivalence conditions help to identify factors that render institutional change non-neutral. We exemplify their use in the context of several applications, relating to social security reform, tax-smoothing policies and measures to correct externalities.

Quality of Life in 2030

The Economist reports about the Economist Intelligence Unit’s quality-of-life predictions. In a first step, current life satisfaction is “explained” based on a cross country, multivariate regression using eleven indicators like national income, crime, trust or health. In the second step, the predicted values of those indicators in the year 2030 are used to predict future life satisfaction.

Switzerland clearly wins, ahead of Australia, Norway, Sweden, Denmark, Singapore, New Zealand, Netherlands, Canada, Hong Kong, Finland, Ireland, Austria, Taiwan, Belgium, Germany, United States, United Arab Emirates, South Korea and Israel. More on the methodology.

Conference on “The Swiss Debt Brake – Ten Years On” at the Study Center Gerzensee

On the occasion of the tenth anniversary of the Swiss “Debt Brake,” the Study Center Gerzensee organized a conference on fiscal institutions, joint with the Swiss Society of Economics and Statistics, the Federal Finance Administration and the Universities of Lucerne and St. Gallen. The program can be viewed here (PDF).

A few tidbits: Eveline Widmer-Schlumpf (President of the Swiss Confederation) emphasized the importance of “rigor and flexibility” as well as democratic legitimacy for the success of the Swiss debt brake rule.

Against the background of his experience at the Congressional Budget Office, Barry Anderson (National Governors Association) stressed the importance of the personality of the head of an independent fiscal institution: What is needed, in his view, is a low key technician who avoids the limelight.

Guido Tabellini (Bocconi University) argued that a successful budgetary framework needs to be consistent with the political system. Rules on the local level can be stricter and simpler because of transfers on the national level and national enforcement possibilities. Enforcement requires public support and thus, understanding by voters.

Similarly, Joakim Sonnegård (Swedish Fiscal Policy Council) argued in favor of self-enforcing mechanisms and institutionalized memory of bad times.

Addendum:

Conference papers published in the Swiss Journal of Economics and Statistics (2013 II; summary).

“‘Mehr Europa’ greift zu kurz (‘More Europe’ Does Not Suffice),” FuW, 2012

Finanz und Wirtschaft, September 8, 2012. PDF. Ökonomenstimme, September 10, 2012. HTML.

  • Policy makers confuse debt and financial crises with a currency crisis.
  • Different crises call for different policy responses. Many of those lie in the national policy domain, not the supra national one.
  • Shifting too much policy responsibility, too quickly to the European level sows the seeds of new problems.

“Makroökonomie I (Macroeconomics I),” Bern, Fall 2012

Undergraduate course at the University of Bern.

Lectures are held in German and cover the following topics: Einfühung; IS-LM; Arbeitsmarkt; AS-AD; Phillips; Erwartungen; Aussenhandel, Kapitalverkehr, Wechselkurse; Gütermarkt in der offenen Volkswirtschaft; Mundell-Fleming; Währungspolitik; Staatsverschuldung; Wachstum (Empirie); Solow; Technischer Fortschritt. Lectures follow these slides (in German): Part 1, part 2, part 3. Time: Wed 12-14. University course site. Exam: See university course site for date, time, location. Course assistant: Sarah Fischer.

“Banken und Staaten (Banks and States),” FuW, 2012

Finanz und Wirtschaft, June 20, 2012. PDF. Ökonomenstimme, June 22, 2012. HTML.

  • Changes in bank regulation reflect changed views about whether banks contribute to the social good. Those views have become less favourable.
  • In Switzerland, bank secrecy is no longer defended because the perceived cost to the general public exceeds the benefits to the banks.
  • Similar doubts start to arise regarding money creation by banks. A proposal to shift to a 100% money regime offers some advantages.

Useful LaTeX Code for Simple, Elegant Slides

This code generates simple but elegant slides and avoids the clutter of many more sophisticated styles. Its main advantage, however, is that it allows to directly recycle the source code of an article (including section commands etc.) .

\documentclass[20pt,a4paper,landscape,titlepage,endnotes]{ext article}
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\setlength{\parskip}{.2cm}
\newcommand{\longseminar}[1]{#1} % for slides that are only presented in long seminars
% \newcommand{\longseminar}[1]{\!}
\newcommand{\new}{\newpage}
% \newcommand{\details}[1]{#1}
\newcommand{\details}[1]{}
\usepackage{ulem}
\newcommand{\striketextthrough}[1]{\sout{#1}}
\normalem % to disable ulem package after this command definition, because ulem also changes \emph etc.
\usepackage{fancyhdr}
\pagestyle{fancy} % headings, plain, empty, headings, myheadings
\renewcommand{\headrulewidth}{0.4pt}
\renewcommand{\headrulewidth}{0pt}
\renewcommand{\footrulewidth}{0.4pt} % text for footers and headers defined in document
\fancypagestyle{plain}{\fancyfoot{}\fancyhead{}\renewcommand{\headrulewidth}{0pt}\renewcommand{\footrulewidth}{0pt}}
\newcommand{\origsection}{}
\let\origsection=\section
\renewcommand{\section}[1]{\newpage\origsection*{#1}\markboth{#1}{}}
%\newpage\pagenumbering{arabic}\renewcommand{\thepage}{\thesection--\arabic{page}}
\newcommand{\origsubsection}{}
\let\origsubsection=\subsection
%\renewcommand{\subsection}[1]{\newpage\origsubsection*{#1}\markright{#1}{}}
\renewcommand{\subsection}[1]{\origsubsection*{#1}\markright{#1}{}}
\newcommand{\origsubsubsection}{}
\let\origsubsubsection=\subsubsection
\renewcommand{\subsubsection}[1]{\origsubsubsection*{#1}}
\newcommand{\origitem}{}
\let\origitem=\item
\renewcommand{\item}{\vspace{-.4cm}\origitem[$\rhd$]}
\renewcommand{\item}{\origitem}
\usepackage[font=footnotesize]{caption}
\newcommand{\origcaption}{}
\let\origcaption=\caption
\renewcommand{\caption}[1]{\origcaption*{#1}}
\renewcommand{\caption}{\origcaption}
\makeatletter
\usepackage{type1cm}
\renewcommand\normalsize{%
\@setfontsize\normalsize{25pt}{29pt}%
\abovedisplayskip 12\p@ \@plus3\p@ \@minus7\p@
\abovedisplayshortskip \z@ \@plus3\p@
\belowdisplayshortskip 6.5\p@ \@plus3.5\p@ \@minus3\p@
\belowdisplayskip \abovedisplayskip
\let\@listi\@listI}
\normalsize
\makeatother
\usepackage{color}
% … here add additional, standard commands, settings, packages, ...
% Workaround to use hyperref and landscape slides
% Remove if you are using portrait slides
\makeatletter
\def\special@paper{297mm,210mm}
\makeatother % this workaround has to come after a hyperref call
\usepackage{mathpazo}

“Ageing, Government Budgets, Retirement and Growth,” EER, 2012

European Economic Review 56(1), January 2012, with Martín Gonzalez-Eiras. PDF.

We analyze the short and long run effects of demographic ageing—increased longevity and reduced fertility—on per-capita growth. The OLG model captures direct effects, working through adjustments in the savings rate, labor supply, and capital deepening, and indirect effects, working through changes of taxes, government spending components and the retirement age in politico-economic equilibrium. Growth is driven by capital accumulation and productivity increases fueled by public investment. The closed-form solutions of the model predict taxation and the retirement age in OECD economies to increase in response to demographic ageing and per-capita growth to accelerate. If the retirement age were held constant, the growth rate in politico-economic equilibrium would essentially remain unchanged, due to a surge of social security transfers and crowding out of public investment.

(Unfortunately, the acknowledgements got lost in the publishing process.) For comments, we thank Casper van Ewijk, Enrique Kawamura, George McCandless, Alex Monge, Vincenzo Quadrini, Jaume Ventura, Fabrizio Zilibotti as well as conference and seminar participants at Banco Central de la Republica Argentina, CREI (Universidad Pompeu Fabra), EEA annual meeting, EPRU (University of Copenhagen), ESSIM, IIES (Stockholm University), Netspar, Penn State, SED annual meeting, Study Center Gerzensee, and Universidad de San Andres. Andreas Walchli provided valuable research assistance.

“Bedroht der demografische Wandel die Produktivität? (Does Population Ageing Lower Productivity Growth?),” NZZ, 2011

Neue Zürcher Zeitung, November 16, 2011. PDF. Ökonomenstimme, November 16, 2011. HTML.

  • The economics is not as worrying as many believe.
  • But the politics is.

“Makroökonomie I (Macroeconomics I),” Bern, Fall 2011

Undergraduate course at the University of Bern.

Lectures are given in German and cover the following topics: Einführung; IS-LM; Arbeitsmarkt; AS-AD; Phillips; Erwartungen; Aussenhandel, Kapitalverkehr, Wechselkurse; Gütermarkt in der offenen Volkswirtschaft; Mundell-Fleming; Währungspolitik; Staatsverschuldung; Wachstum (Empirie); Solow; Technischer Fortschritt. Lectures follow these slides (in German): Part 1, part 2, part 3. Time: Wed 13-15. University course site. Exam in January and February 2012; see university course site for date, time, location. Course assistant: Andreas Bachmann.

Anniversary of the Study Center Gerzensee

The history of the “New Castle,” the home of the Study Center Gerzensee, goes back to 1700 when a belvedere – built in French baroque style on the slopes of the Belpberg in the community of Gerzensee – was raised by Samuel Morlot. Over the centuries, many families owned the property before the Swiss National Bank acquired it in 1980. Four years later, the foundation Study Center Gerzensee was established and the Swiss National Bank transferred the manor house and surrounding real estate to the foundation. The first courses at the Study Center took place in 1986.

A brochure (in German) that was published on the occasion of the 25th anniversary of the opening of the Study Center reviews the history of the “New Castle.”

“Die Zukunft des Euros (The Euro’s Future),” FuW, 2011

Finanz und Wirtschaft, February 23, 2011. PDF. Ökonomenstimme, March 1, 2011. HTML.

  • A banking crisis doesn’t imply a currency crisis.
  • Spreads on periphery bonds signal credibility of the ECB.
  • Debt restructuring must not be excluded as a policy option.