For a Sustainable Contribution Rate of the Statutory Unemployment Insurance
Ingmar Kumpmann
Wirtschaft im Wandel,
No. 11,
2007
Abstract
The German Federal Government has decided to decrease the contribution rate of the statutory unemployment insurance from 4.2 to 3.3 per cent of gross wages. The unemployment insurance retards the income loss in times of increasing unemployment, which has a dampening effect on the business cycle. In order not to countervail this effect it is necessary to hold the contribution rate stable over times with high and low unemployment. Therefore, the budget surplus of the unemployment insurance agency in the current economic upswing is no sufficient argument for a contribution cut. A present reduction of the contribution rate induces the risk of a new contribution rise in the next economic slowdown. It would be better to build up sufficient reserves so that a contribution rise will be avoidable even in times with increasing unemployment.
Read article
Market Follows Standards
Ulrich Blum
Wirtschaft im Wandel,
No. 10,
2007
Abstract
Standards are an important part of the codified knowledge of a society. In contrast to industry standards, formal standards are created in a consensus-based procedure open to all interested parties. Only if an economic interest for application exists will formal standards be produced. Interested parties have to shoulder participation costs themselves, which enforces economic interest. Up to a certain extent, governments also trigger and finance formal standardisation processes through the new approach, which creates a framework that is filled by private activity. Standards stand at the end of intellectual property rights if the totality of the value chain of knowledge production is looked at. One important aspect is their accessibility and the inclusion of all necessary intellectual property rights, especially patents, at reasonable prices. Conversely, consortia may exclude groups from the use of their standards. By preventing the licensing of those patents included in a standard, they can effectively block market entry. Thus, “successful” standards often face antitrust problems. Formal standards reduce costs of production through economies of scale, economies of scope and network-economies. Goods and processes that are standardized signal quality, the inclusion of high technological standards and permanent presence in the markets, which again accelerates market dissemination. Firms face a dilemma: On the one hand, the penetration of a markets with industry standards offers potentials for high profits; on the other hand, this has to be balanced against the risk of failure, especially if clients are hesitant because they do not know which standard will be successful in the end. Formal standards create and stabilize trust markets. This is especially true in the area of globalisation. Europe, which has to face an enormous competition in the international knowledge economy, needs an institutionally efficient approach to formal standardisation. This contribution addresses future problems of the European standardisation that have been developed within the framework of a working group of the European Standardisation Organisation called Future Landscape of European Standardisation (FLES).
Read article
East German Economy: Demand Push Stronger than Structural Deficiencies
Wirtschaft im Wandel,
No. 7,
2007
Abstract
In 2006, growth of production was surprisingly strong in Eastern Germany. The structural deficiencies there would have suggested a slower pace. In particular, linkages with national and international business cycles have been underestimated. To a large part, the reason why output grew by 3 per cent did not come from Eastern Germany itself, but from the Old Länder and from abroad. In the New Länder, the strong upward swing in investment activity stimulated the economy. However, owing to a small increase in total income of private households, their purchasing power lagged behind.
The improved ability of East German firms to absorb cyclical impulses from exports and from Germany’s general investment activity proved to be a crucial factor. In particular, the endowment of workplaces with modern production facilities as well as the continued reduction in the disadvantages with respect to cost-competitiveness in the tradable goods sector were beneficial. The labour cost advantage compared to West German competitors increased further while the disadvantage compared to those from Central and Eastern Europe decreased.
Benefiting from these factors, economic activity in Eastern Germany will grow faster than in the Old Länder as long as the upswing in Germany and abroad remains strong. In 2007 and 2008, investments – especially in equipment – and exports will be the driving forces again. For exports, the strongly expanding markets in Central and Eastern Europe as well as in Russia will gain in importance. As income and employment prospects improve, private consumption will support the growth in production. Registered unemployment should decrease below the 1-million threshold.
Manufacturing will remain the primary force of the upswing; its advantages in production costs will not vanish as long as, even in presence of scarcity of skilled labour, salaries and wages do not increase more than in Western Germany. In the wake of robust economic growth, the New Länder will make further progress in catching up with respect to production and income.
Companies will regain support from the banking industry. Yet, investment capital still stems from public funding programmes to a non-negligible extent. In the medium run, access to credit will ease as a result of further improvements in the firms’ net worth position. However, dependency on internal funds remains high and exposes companies to comparatively strong cyclical risks. In an economic downturn, the structural deficiencies of the East German economy will impair economic expansion.
Read article
Effects of European Competition Policy Reform for Central East Europe - an Institutional Perspective
Johannes Stephan, Jens Hölscher
Intellectual Economics,
No. 1,
2007
Abstract
With the Central and East European countries increasingly included into the international division of labour in the European Economic space, we are prompted to ask whether this integration operates on a level playing field with respect to competition policy. In fact, a comparison between the more advanced West European countries and countries in Central and East Europe reveals that effectiveness of implementation of competition law and policy and intensity of competition are lower in the East and in particular also in the new EU member countries of Central East Europe, where the institutional framework of the West had been taken over some years ago now. In this situation, the EU recently decided to reform competition policy by delegating some of its powers to national competition agencies. We discuss whether this reform will likely spur competition or whether this may turn out to be rather ill-designed for the particularities in post-socialist economies.
Read article
Demographic development and its economic consequences
Joachim Ragnitz, Lutz Schneider
Wirtschaft im Wandel,
No. 6,
2007
Abstract
Within the next decades, East Germany will continue to face strong demographic challenges. In addition to shrinking, the ageing of population and labour force will more and more affect the economic development of the new Länder. Against this background, the question rises whether the shift of workforce age structure will influence growth and innovation potential as well as structural change. The IWH recently has focused on this topic widely ignored by the research literature so far. On the basis of selected methods and data, the economic impact of workforce ageing was empirically evaluated. The first issue concerns the impact of age on productivity. Based on two separate empirical investigations, the conclusion can be drawn that above a certain stage, age diminishes productivity. But higher levels of experience might partly compensate for this reduction. Secondly, the innovation effects of ageing have been analyzed. Again, significant age effects arise. Employees at the age of about 40 years turn out to be the most innovative part of the workforce. Furthermore, the analysis shows that engineers are particularly subject to age effects. A third study sheds light on the challenging consequences of ageing on entrepreneurship potential. Hence, independently of the increasing problem of skill shortages, ageing itself will unfavourably affect growth, innovation and structural change. Though political options are limited due to the more or less fixed demographic trends, appropriate instruments regarding economic, family and education policy might lower the identified age effects.
Read article
Industry Specialization, Diversity and the Efficiency of Regional Innovation Systems
Michael Fritsch, Viktor Slavtchev
Jena Economic Research Papers, Nr. 2007-018,
No. 18,
2007
Abstract
Innovation processes are characterized by a pronounced division of labor between actors. Two types of externality may arise from such interactions. On the one hand, a close location of actors affiliated to the same industry may stimulate innovation (MAR externalities). On the other hand, new ideas may be born by the exchange of heterogeneous and complementary knowledge between actors, which belong to different industries (Jacobs’ externalities). We test the impact of both MAR as well as Jacobs’ externalities on innovative performance at the regional level. The results suggest an inverted u-shaped relationship between regional specialization in certain industries and innovative performance. Further key determinants of the regional innovative performance are private sector R&D and university-industry collaboration.
Read article
Ageing in East Germany: Remarkable reduction of entrepreneurship
Lutz Schneider, Stefan Eichler
Wirtschaft im Wandel,
No. 4,
2007
Abstract
Population shrinking and ageing are obvious trends in many German regions, but in the Eastern states they reach an unique level. An often ignored economic implication of these demographic deve-lopments is the reduction of the entrepreneurial potential. Shirking, on the one hand, diminishes the quantity of potential entrepreneurs, on the other hand these effects are strengthened by ageing trends, since people usually decide in younger years to found an enterprise. The analysis tries to quantify the impact of demographic change on entrepreneurship activities in east Germany until 2020. At the first stage on the basis of the Mikrozensus survey age specific shares of new entrepreneurs are calculated. In order to obtain a status-quo-forecast of new entrepreneurs at the second stage these quotas are combined with the population projections for the East Germany. As expected the propensity to set up a new business is highest for persons at the age form 25 to 39 years. Due to the strong reduction of this age group the number of new firm foundations will fall by approximately 25% until 2020.Whereas the decline in Berlin will be relatively small (14%), Brandenburg has to bear an alarming reduction of 32%.In contrast the West German states show only a reduction of 6% during the same period, which emphasizes the extraordinary dimension of demographic change in East Germany.
Read article
FDI versus exports: Evidence from German banks
Claudia M. Buch, A. Lipponer
Journal of Banking and Finance,
No. 3,
2007
Abstract
We use a new bank-level dataset to study the FDI-versus-exports decision for German banks. We extend the literature on multinational firms in two directions. First, we simultaneously study FDI and the export of cross-border financial services. Second, we test recent theories on multinational firms which show the importance of firm heterogeneity [Helpman, E., Melitz, M.J., Yeaple, S.R., 2004. Export versus FDI. American Economic Review 94 (1), 300–316]. Our results show that FDI and cross-border services are complements rather than substitutes. Heterogeneity of banks has a significant impact on the internationalization decision. More profitable and larger banks are more likely to expand internationally than smaller banks. They have more extensive foreign activities, and they are more likely to engage in FDI in addition to cross-border financial services.
Read article
Considerable Export Potentials in Eastern Germany
Götz Zeddies
Wirtschaft im Wandel,
No. 2,
2007
Abstract
For a long time, the Federal Republic of Germany is one of the countries with the highest export performance in the world. But a closer examination of East- and West-Germany reveals substantial regional differences. The collabse of the markets in the eastern European countries, which were the main trading partners of GDR, after the breakdown of communism caused a sustainable decline of East-German exports. Nevertheless it was expected that the economic recovery in the former communist countries and the access to new export markets in the western world would cause an upward movement of East-German Trade. Although during the last years East-German exports grew faster than those of Western Germany, the east German share in Germanys total exports is still comparatively low. On the basis of a gravity-model of trade, bilateral export potencials are empirically analysed. This is done for the Federal Republic of Germany as a whole, and seperately forEast and West-Germany. Afterwards, the calculated export potencials are compared with actual exports. The results show that Germany as a whole exceeds its export potencial against the majority of its main trading partners. The differentiated analysis for East and West-Germany supports the hypothesis that Germanys high export performance stems from the western part of the country, whereas the eastern part exploits its export potencial with Germanys main trading partners only to the half. The unexploited export potencials as well as the higher concentration on the fast-growing central and eastern European markets imply considerable potencials for East-German exports to grow in the future.
Read article
Population ageing and new entrepreneurship activities in East Germany
Stefan Eichler, Lutz Schneider
Wirtschaftspolitik und wirtschaftliche Entwicklung: Analysen unter besonderer Berücksichtigung ostdeutscher Regionen,
2007
Abstract
Population shrinking and ageing are obvious trends in many German regions, but in the Eastern states they reach an unique level. An often ignored economic implication of these demographic developments is the reduction of the entrepreneurial potential. Shirking, on the one hand, diminishes the quantity of potential entrepreneurs, on the other hand these effects are strengthened by ageing trends, since people usually decide in younger years to found an enterprise. The analysis tries to quantify the impact of demographic change on entrepreneurship activities in east Germany until 2020.
Read article