Emphasis in Research

The Institute’s main research activities concentrate on:

A) Economic dynamics and adjustment processes in international economics and development

Markets are typically characterized by imperfections; this applies equally to markets for goods, labor and capital. Under these conditions, questions of technological progress and dynamic adjustment processes and of employment and competition are of central importance.

1.Agglomeration and unemployment

This project is part of the long term research area “Dynamic adjustment processes in general equilibrium models with imperfections in goods and labor markets”.

(Ingrid Kubin in cooperation with Martin Currie, Manchester University, Great Britain; Dr. Pasquale Commendatore, Università di Napoli Frederico II, Italy)

Research question:

European integration is successively reducing barriers to trade and to the mobility of production factors (labor and capital). Industrial production can be relocated and concentrated in core areas, while in peripheral areas loose industrial production. From a policy perspective, the question is how these agglomeration processes affect employment and unemployment. Tax policy is also becoming increasingly relevant in this context, because it is suspected that certain countries are strategically applying tax instruments to increase their share of industrial production.

Method:

The research is theory-based and uses models from the New Economic Geography, that analyze agglomeration processes brought about by the migration of workers and the relocation of industrial production. However, unemployment has not yet been addressed in these models. Therefore we will combine the New Economic Geography models with Keynesian macroeconomic models that explicitly focus on unemployment. Particular emphasis will be placed on the analysis of dynamic adjustment processes, which are typically neglected in the relevant literature, and on the role played by tax policy in these processes.

2. Agglomeration processes in ageing societies

(Ingrid Kubin, in cooperation with Alexia Fürnkranz-Prskawetz, Gustav Feichtinger and Gernot Tragler; Theresa Grafeneder-Weissteiner, doctoral thesis)

Description of the project

3. Agglomeration, linkages and industrial development in South Africa

(Oliver Schwank)

Doctoral thesis

The industrial structure of South Africa will be analyzed using a model taken from New Economic Geography literature. The model represents agglomeration effects as the result of linkages between companies in the industrial sector. Simulations with data calibrated to reflect South African conditions will allow for the analysis and assessment of the current industrial sector policy in South Africa and show opportunities for development.

4. Effects of innovation and technological progress

(Anna Hammerschmidt)

Firms carrying out research and development (R&D) contribute to the production of new knowledge. Knowledge, to a certain extent a public good, is subject to externalities. These externalities, which are referred to as R&D spillovers, may lead to market failures. The typical result is under-investment (more infrequently also over-investment) in R&D. Policy measures applied to correct these market failures include stimulation of R&D cooperation, R&D subsidies, and provisions with regard to intellectual property rights and antitrust issues. A central issue in this domain is determining which conditions –for example, demand structures – cause these market failures. To analyze these questions, models are used which come from the literature on industrial economics and which apply game theory. Other models applied include endogenous growth models containing an explicit R&D sector. Scientific contacts are maintained with the University of Vienna, the Institute for Advanced Studies (IAS, Vienna) and Prof. Goetz at the University of Giessen, Germany, among others.

5. The role of diversified multi-product firms in the economic development process

(Florian Ramseger)

It is well known that market failures can hinder economic development and possibly warrant government intervention (such as trade policy). However, the private sector can often reduce some of these market failures on its own; for example in the business literature it is well documented that diversified multi-product firms frequently arise as a response to market failures. This project looks at this interesting issue from an economics perspective: the costs and benefits for society as a whole and what it implies for the public sector are analysed.

B) Socio-economic development and governance in multi-level systems

(Joachim Becker)

This project concentrates on identifying and analyzing connections between socio-economic development processes and changes in forms of governance, including spatial configuration. The research is related to politically relevant discussions. The project’s unique profile is due to its comparative methods, and it is closely linked to the topics of economic growth and employment, specifically to spatial and institutional issues in these fields.

The project is being conducted in interdisciplinary cooperation with various WU departments. Cooperations and close scientific contacts are also maintained with the University of Vienna, the Austrian Chamber of Labor, and the Austrian Research Foundation for International Development (ÖFSE). Internationally, researchers work together with research institutions in Montevideo, Porto Alegre and Buenos Aires, and contacts are maintained to scientists in Grenoble and Kassel.