Get help from the best in academic writing.

The Economy In Switzerland Economics Essay

Switzerland is a peaceful, wealthy, and current market economy with low unemployment, a highly expert labor force, and a per capita GDP among the highest in the world. Switzerland’s economy benefits from a highly developed service sector, led by financial services, and a manufacturing industry that specializes in high-technology, knowledge-based production. Its economic and political stability, transparent legal system, exceptional infrastructure, efficient capital markets, and low corporate tax rates also make Switzerland one of the world’s most competitive economies. The Swiss have brought their economic practices largely into conformity with the EU’s, to enhance their international competitiveness, but some trade protectionism remains, particularly for its small agricultural sector. The fate of the Swiss economy is tightly linked to that of its neighbors in the euro zone, which purchases half of all Swiss exports. The global financial crisis of 2008 and resulting economic downturn in 2009 stalled export demand and put Switzerland in a recession. The Swiss National Bank (SNB) during this period effectively implemented a zero-interest rate policy to boost the economy as well as prevent appreciation of the franc, and Switzerland’s economy recovered in 2010 with 2.7% growth. The sovereign debt crises currently unfolding in neighboring euro-zone countries pose a significant risk to Switzerland’s financial stability and are driving up demand for the Swiss franc by investors seeking a safehaven currency. The independent SNB has upheld its zero-interest rate policy and conducted major market interventions to prevent further appreciation of the Swiss franc, but parliamentarians have urged it to do more to weaken the currency. The franc’s strength has made Swiss exports less competitive and weakened the country’s growth outlook; GDP growth fell to 2.1% in 2011. Switzerland has also come under increasing pressure from individual neighboring countries, the EU, the US, and international institutions to reform its banking secrecy laws. Consequently, the government agreed to conform to OECD regulations on administrative assistance in tax matters, including tax evasion. The government has renegotiated its double taxation agreements with numerous countries, including the US, to incorporate the OECD standard, and in 2011 it reached deals with Germany and the UK to resolve outstanding issues, particularly the possibility of imposing taxes on bank deposits held by foreigners. These steps will have a lasting impact on Switzerland’s long history of bank secrecy.
Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Source: CIA World Factbook – Unless otherwise noted, information in this page is accurate as of July 26, 2012
1. Introduction: About two third of the area of Switzerland is covered with forest, lakes and mountains. Since Switzerland has no mineral resources, it must import, process and resell them as products. “Services” are the most important part of the economy. This includes banking, assurances and tourism.
agricultural is also an important part of the economy. But the production of the Swiss farmers does not fulfill the needs of all people, so Switzerland must rely on imported goods from other countries.
2. The three sectors: The economy in Switzerland is divided into three sectors:
landwirtschaft (agriculture)
industrie (industry)
diensteistungen (services)
Less than 10% of the population is employed in the landwirtschaft (agriculture), also considered the primary sector. This sector is strongly supported by the government.
About 40% of the population is employed in the “Industrie, Gewerbe and Handwerk” (industry, trade and handicraft), also considered the secondary sector. This sector includes the “Maschinen- und Metallindustrie” (machine and metal industry),”Uhrenindustrie” (watch industry) and the “Textilindustrie” (textile industry). All of them export much of their products to foreign countries and suffer a lot because of the expensive Swiss Franc. The fact that Switzerland does not belong to the European Union additionally slows down the Swiss exports.
More than 50% of the population is employed in the “Dienstleistungssektor” (services), also considered the tertiary sector. This sector includes banking, assurances, tourism and so on. Banking is one of the most important businesses in Switzerland. Many of the banks have started to use the Internet for business purposes. For more information, see the directory of Swiss banks.
3. Foreign trade: Switzerland is one of the countries with the highest contribution of the foreign trade to the gross inland product. The most important trade partners are the so called “industrialized countries”. In 2003, 77.2% of the exported goods were shipped to and 89.0% of the imported goods came from those countries. In particular, 60.3% of the goods were shipped to and 81.7% of the imported goods came from countries which belong to the European Union (EU).
3.1 Most important trade partners: The tables below show the names of the countries and the values of the imported and exported goods in million Swiss Francs (1 million = 1’000’000) for the year 2003. Rank Country Import Rank Country Export 1
Germany
41’200
1
Germany
27’700
2
Italy
13’800
2
USA
13’800
3
France
13’700
3
France
11’500
4
Netherlands
6’400
4
Italy
11’000
5
Austria
5’400
5
Great Britain
6’200
USA
5’400
6
Japan
5’100
6
Great Britain
4’900
7
Austria
4’400
7
Ireland
4’700
Netherlands
4’400
8
Belgium
3’600
8
Belgium
2’600
9
Japan
2’600
9
Ireland
900
3.2 Most important trade goods: The table below shows the value of the imported and exported goods in million Swiss Francs (1 million = 1’000’000) for the year 2002.
No Goods Import No Goods Export 1
Chemicals
27’256
1
Chemicals
44’846
2
Machines
25’925
2
Machines
31’693
3
Vehicles
12’843
3
Precision tools, watches, jewelry
22’602
4
Agriculture and fishery
9’864
4
Agriculture and fishery
4’219
5
Metals
9’329
5
Vehicles
3’742
6
Textile, clothing and shoes
8’625
6
Textile, clothing and shoes
3’726
7
Precision tools, watches, jewelry
8’167
7
Leather, rubber, plastic
3’647
8
Energy
5’369
8
Paper
3’275
9
Paper
4’740
9
Other
1’746
10
Other
4’516
10
Metals
975
11
Leather, rubber, plastic
4’264
11
Stone, soil
780
12
Stone, soil
2’229
12
Energy
363
4. Currency: The Swiss currency is called “Schweizerfranken” (“Swiss Francs”) or short “Franken”. One hundred “Rappen” make up one Swiss Franc. CHF is the ISO representation for Swiss francs; however, the old notation sFr. is still used quite often.
This is a 5 Franken coin, called a “fünfliber”
The currency is available in the following coins: 1 Rappen (“Räppler”, no longer in use)
2 Rappen (“Zweiräppler”, no longer in use)
5 Rappen (“Fünfer”)
10 Rappen (“Zehner”)
20 Rappen (“Zwanziger”)
½ Franken (“Fünfziger”)
1 Franken (“Fränkler”)
2 Franken (“Zweifränkler”)
5 Franken (“Fünfliber”) – a long time ago, there used to be a five francs bill (includes images of approx. 220kB)
Images of all coins. The currency is available in the following bills:
10 Franken (images of current, previous and older bill, approx. 400 kB)
20 Franken (images of current and previous bill, approx. 450 kB)
50 Franken (images of current bill, approx. 220 kB)
100 Franken (images of current, previous and older bill, approx. 710 kB)
200 Franken (images of current bill, approx. 270 kB)
1000 Franken (images of current bill, approx. 330 kB)
To convert currency, we suggest the oanda online currency converter.
5. Cost of living: Now and then I receive questions about the cost of living in Switzerland. Even tough it is difficult to compare the costs of living between various countries, I try to list some indications that may give an idea what it means to go along with your salary in Switzerland.
5.1 Exchange rates: I remember times when I was young (some 35 years ago), when one US dollar (USD) cost more than four Swiss Francs (CHF) and one German Mark cost more than one Swiss Franc. Today (May 14, 2010), one US dollar costs approximately CHF 1.11 and the German Mark has been replaced by the Euro (EUR). One Euro corresponds to about CHF 1.40. These ever changing exchange rates are one problem in comparing costs of living.
5.2 Salaries: Another problem in comparing the costs of living is the amount of money one has available to spend, also known as the salary. This is particularly difficult because most people do not like to talk about it, at least here in Switzerland. Of course, the actual salary depends on the education, the position within the company or organization, the duration of the employment etc. The following table is a very rough approximation of a yearly income depending on the level of education:
type of education salary range apprenticeship (typically 3 or 4 years)
CHF 40’000 – 80’000
Academic
CHF 70’000 – 150’000
lower management
CHF 120’000 – 250’000
higher management
CHF 200’000
5.3 Expenses: Again as a very rough approximation, a Swiss family spends its income as follows:
25-35% for rent of a condominium or house
10-20% for assurances (health, liability, theft, car), health care and savings deposits
15-20% for food (at home and in restaurants)
20-40% for other expenses (non-food, car maintenance, phone bills, vacations, recreational activities)
5-15% for taxes (Taxes vary across the different cantons quite a lot)
5.4 Cost of some food goods: The following table is a list of some food goods and their approximative cost as of summer 2010 in the area of Zürich.
Goods Amount Approximative cost in CHF Bread in a store
1 kg
3.00 – 4.00
Milk in a store
1 liter
2.00
Coffee or tee in a restaurant
1 cup (no refill)
3.50
Softdrink in a restaurant
0.2 or 0.3 l
3.50 – 4.00
Hamburger in fast food restaurant
200 gr
5.00
A meal in a family restaurant without beverages
1 person
15.00 – 30.00
If you are not familiar with our metric unit system, see explanations about metric versus U.S. unit systems
5.5 Cost of some non-food goods: The following table is a list of some non-food goods and their approximative cost as of spring 2010 in the area of Zürich.
Goods Amount Approximative cost in CHF Diesel
1 liter
1.85 (changes daily!)
Gasoline
1 liter
1.70 (changes daily!)
Cigarettes
1 pack
5.00
Compact Disk (music)
1 CD
10.00 – 25.00
Jeans
1
100.00 – 150.00
Building land
1 m²
400.00 – 1200.00
House (without land)
4 . 5 rooms
400’000 – 1’000’000
If you are not familiar with our metric unit system, see explanations about metric versus U.S. unit systems

A Short History Of Economic Growth Theory Economics Essay

A Short History of Economic Growth Theory. Economic growth is an important part of economic theory and one of the most significant problems economists tried to explain is the differences of growth rates of countries.
Economic progress has been discussed since the time of physiocrats and Adam Smith. In his book “Wealth of Nations” (1776), Adam Smith mentioned economic growth as the improving and increasing of capital. David Ricardo in “The Theory of Comparative Advantage” (1817) emphasized on the benefits of trade and its role in the expansion of economies.
Many economists argue that the differences in economic growth between countries have been created during the 19th and 20th century. Maddison (2001) estimated statistics of the world countries going back one thousand years. In his work “The World Economy: Historical Statistics” is mentioned the fact that the divergence of income between countries occurred during 1800s. Figure 1 below illustrates his findings.
Figure 2.1
Figure 2.: The evolution of average GDP per capita in Western offshoots, Western Europe, Latin America, Asia, and Africa, 1000-2000
Maddison (2001) discussed that the last millennium, the population of the world increased by 22 times, the world income by 300 times and the income per capita 13 times. During the first 800 years of the last millennium world income increased at approximately 50 per cent, and the growth flourishing started at the early 19th century. Following his research income was not the only progress in the quality of life, the portion of the educated people in society increased significant and the same happened for the life expectancy, which increased almost 3 times what it was at around 1000 (from 24 years to 66). The growth though was not equally distributed around the world, life quality rapidly changed for Western Europe, North America, Australia and Japan, while the rest of the world; Africa, Asia and South America, followed with a slower pace, resulting to increased divergence in income. It is mentioned that “by 1998, the gap was 7:1 between the United States and Africa, the gap is now 20:1.”
From Adam Smith, Robert Malthus and David Ricardo to Robert Solow and Paul Romer, many economists made efforts to shed light on the fundamental factors of growth and thus on the differences of the growth rates between countries. Malthus (1798) argued that as labor force grew faster than technology; the real wages would fall, due to the increased cost of living, causing the reduced growth of the economy. However, as economic progress pauses, population growth rates would fall as well and this would lead to higher real wages and so on. Joseph Schumpeter based on the Marxist economic theory, adopted the term “creative destruction” in order to describe the fact that economic progress may be accompanied by negative effects, as the old ways will be replaced by new (e.g. new technologies that may reduce the labor force needed). The research that set the foundations of modern economic growth theory was the one of Robert Solow and the exogenous growth models. In these models with no technological progress, the diminishing returns will cause the economic growth to slow down and eventually stop. The factor that determined the continuous growth of economies is a parameter A, which is assumed to grow at a constant and exogenous rate. This simple model revealed some valuable perceptions about the growth process, such as that the technological progress is one of the main factors that affect growth. However the limitations of exogenous growth model were the reason of new theoretical and empirical efforts from which emerged the endogenous growth model during the 1980s. Paul Romer in 1986 led the idea of endogenous growth, followed by Aghion, Howitt and others. In these models was introduced the term research and development and the human capital and the accumulation of it is what drives the technological changes. Later innovation and education were introduced to expand the abilities of endogenous growth models but still none of these could explain the large income differences between countries.
Figure 1.2
Figure 1.: The relationship between average growth of income per capita and average years of schooling, 1960-2000. Source: Acemoglu, 2009.
—- One of the oldest growth theories is the one of Reverend Thomas Robert Malthus, who in his work “An Essay on the Principle of Population” described that the growth of population was supposed to be exponential while the growth of food supply was arithmetical, a fact that would lead to a reduction of population in the future. Following his analysis he proposed as measures moral restraints in order to control the growth of population and prevent serious problems that the society would face otherwise such as starvation, disease and war which is called Malthusian Catastrophe. Malthusianism was heavily criticized by David Ricardo and later by Karl Marx. In his work “Das Kapital” (1867) Carl Marx accused Malthus for blaming the poor and characterized him as a “lackey of the bourgeoisie.”

[casanovaaggrev]