Contributions in Merlin

"A crucial aspect of constitutional design is the provision of rules on how anconstitution is to be amended. If procedures for constitutional amendment are very restrictive,nchanges will take place outside the constitution. These changes are likely to be against thencitizens’ interests and their ability to influence the political process. We argue that thendevelopment of the constitution must be based on the rule of law. We propose directndemocratic rights that allow citizens to participate in the amendment process. The directndemocratic process of institutional change is theoretically and empirically analyzed. Annumber of counter arguments and issues for a gradual introduction are discussed."

The apprenticeship system is the most important source of formal post-secondary training in Germany. Using German register data - the IAB Employment Sample - we find that apprentices staying with their training firm after graduation have longer first-job durations but not higher wages than apprentices leaving the training firm. Retention rates, first job durations, and post-apprenticeship wages are all increasing functions of training intensity. Some implications for the ongoing debate as to why firms are willing to invest in general training are discussed.

Theoretical arguments and empirical evidence are advanced to bolster the claim that direct political participation via referenda and initiatives constitutes an advanced form of democracy with beneficial effects on Transition Countries.nDirect democracy raises trust and honesty and improves social outcomes. Per capita incomes and subjective well-being are raised.nStandard arguments against direct democracy (citizens' incompetence and lacking interest, danger of manipulation and emotionality, hindering progress and destroying civil rights, high cost) are rejected.nElements of direct democracy can be introduced at the national and local levels, and then proceeding further. Citizens should have the right to govern this process.n

This paper analyzes a sequential game where firms decide about outsourcing the production of a non-specific input good to an imperfectly competitive input market. We apply the taxonomy of business strategies introduced by Fudenberg and Tirole (1984) to characterize the different equilibria. We find that outsourcing generally softens competition in the final product market. If firms anticipate the impact of their outsourcing decisions on input prices, there may be equilibria where firms outsource so as to collude or to raise rivals’ costs. We illustrate our analysis using a linear Cournot model.

In this paper we study the inefficiencies of the monetary equilibrium and optimal monetary policies in a search economy. We show that the same frictions that give fiat money a positive value generate an inefficient quantity of goods in each trade and an inefficient number of trades (or search decisions). The Friedman rule eliminates the first inefficiency and the Hosios rule the second. A monetary equilibrium attains the social optimum if and only if both rules are satisfied. When the two rules cannot be satisfied simultaneously, which occurs in a large set of economies, optimal monetary policy achieves only the second best. We analyze when the second-best monetary policy exceeds the Friedman rule and when it obeys the Friedman rule. Furthermore, we extend the analysis to an economy with barter and show how the Hosios rule must be modified in order to internalize all search externalities.

"with Divisible Money *nAleksander Berentsen†nEconomics Department (WWZ), University of Basel, SwitzerlandnGuillaume Rocheteau‡nSchool of Economics, Australian National University, AustralianApril 14th, 2003nAbstractnThis paper studies the validity of the Friedman rule in a search model with divisi-blenmoney and divisible goods where the terms of trades are determined endogenously.nWe show that ex post bargaining generates a holdup problem similar to the one em-phasizednin the labour-market literature. Buyers cannot obtain the full return that annadditional unit of money provides to the match, which makes the purchasing power ofnmoney ine .ciently low in equilibrium. Consequently, even though the Friedman rulenmaximizes the purchasing power of money, it fails to generate the first-best allocationnof resources unless buyers have all the bargaining power."

"Money *nAleksander BerentsennEconomics Departement, University of Basel, SwitzerlandnJune 10, 2003nAbstractnThis paper considers a monopolist’s supply of outside paper money in a random-matchingnmodel with divisible money and divisible goods. When binding supplynannouncements are feasible, the revenue-maximizing policy is characterized by anninitial period where the monopolist initiates a currency reform which destroys thenvalue of any old currency, and then issues new money, which the issuer taxes thereafternwith a constant gross growth rate of money. It is shown that this policy is time-consistentnif the trading history of the issuer is public information and if moneyndemanders respond to the relevation of defection by playing autarky."

Business students are portrayed as behaving too egoistically. The critics call for more socialnresponsibility and good citizenship behavior on the part of business students. We present evidence ofnpro-social behavior in business students. Every student at the University of Zurich has to decide eachnsemester whether he/she wants to contribute to two social funds administrated by the University. Withnthis large panel data set, we can analyze whether business students indeed behave less pro-socially thannother students. Two specific hypotheses are tested: do students select into business studies or does thentraining in business studies indoctrinate students in a negative way? The evidence suggests that therenmay be a selection effect going on. Therefore, economics education does not change the citizenshipnbehavior of business students.

This paper provides a survey of recent experimental work in eco-nnomics focussing on social and economic networks.The experimentsnconsider networks of coordination and cooperation,buyer-seller net-nworks,and network formation.

Under certain conditions the optimal insurance policy will offer full coverage above a deductible, as Arrow and others have shown long time ago. Interestingly, the same design of insurance policies applies in case of a single loss and ex-ante moral hazard. However, many insurance policies provide coverage against a variety of losses and the possibilities for the insured to affect the probabilities of each possible loss might be substantially different. The optimal design of a insurance contract providing coverage against different losses therefore should generally differ from the standard form under moral hazard. The paper concentrates on the conditions under which the standard insurance contract holds under moral hazard and more than one loss. It gives some evidence that many insurance contracts should be split up. The main result is, that the relative changes of probabilities due to precautious activities are decisive. On the other hand, under moral hazard it is rarely ever optimal to combine two losses in one insurance contract prescribing only a single deductible for both losses if both losses can occur simultaneously.