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Lessons of the financial crisis for the attractiveness of European financial centers

  • Lang, Gunnar
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    This paper analyses fundamental location factors for the financial industry by investigating the economic significance of market participants' assessments of location factors and country-specific characteristics over time. A unique data set allows studying the locational attractiveness of financial centers before, during, and after the recent financial crisis. The results reveal that especially dense networks in cluster concentration and governmental support strongly determine a location's attractiveness for financial institutions, whereas a specialized pool of labor alone without concentration and the level of taxation seem not to be relevant. Financial centers with a strong home market benefit during times of crisis in contrast to offshore centers and vice versa. Overall, financial centers' attractiveness varies over time, while the decisive location factors stay the same. The findings are not hinged by differences in market participants' socio-economic backgrounds. Investment fund companies seem to value the attractiveness of a financial center much more than banks, insurance companies, and corporates do.

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    File URL: http://econstor.eu/bitstream/10419/67408/1/732054818.pdf
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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-080.

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    Date of creation: 2012
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    Handle: RePEc:zbw:zewdip:12080
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    1. Brülhart, Marius & Jametti, Mario, 2004. "Vertical versus Horizontal Tax Externalities: An Empirical Test," CEPR Discussion Papers 4593, C.E.P.R. Discussion Papers.
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    7. Sandra Schmidt & Dieter Nautz, 2012. "Central Bank Communication and the Perception of Monetary Policy by Financial Market Experts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 323-340, 03.
    8. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    9. Britta Klagge & Ron Martin, 2005. "Decentralized versus centralized financial systems: is there a case for local capital markets?," Journal of Economic Geography, Oxford University Press, vol. 5(4), pages 387-421, August.
    10. Anthony J. Venables, 1993. "Equilibrium Locations of Vertically Linked Industries," CEP Discussion Papers dp0137, Centre for Economic Performance, LSE.
    11. Michael E. Porter, 2000. "Location, Competition, and Economic Development: Local Clusters in a Global Economy," Economic Development Quarterly, , vol. 14(1), pages 15-34, February.
    12. Lang, Gunnar & Köhler, Matthias, 2011. "How does the domiciliation decision affect mutual fund fees?," ZEW Discussion Papers 11-085, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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