Volume 11, Issue 1

The average height of children is an indicator of the quality of nutrition and healthcare. In this study, we assess the effect of unemployment and other factors on this variable. In the Eastern German Land of Brandenburg, a dataset of 253,050 preschool height measurements was compiled and complemented with information on parents’ schooling and employment status. Unemployment might have negative psychological effects, with an impact on parental care. Both a panel analysis of districts and an assessment at the individual level yield the result that increasing unemployment, net out-migration and fertility were in fact reducing height.

If the government announces the termination of a subsidy paid for an irreversible investment under uncertainty, investors might decide to realize their investment so as to obtain the subsidy. These investors might have postponed an investment if future payment were assured. Depending on the degree of uncertainty and the time preference, the termination of the subsidy might cost the government more in toto than granting the subsidy on a continuing basis. A better strategy would be to reduce the subsidy in parts rather than to terminate the subsidy in its entirety.

This paper analyzes the interaction between structural change and labor market dynamics in West Germany, during a period when industrial employment declined by more than 30% and service sector employment more than doubled. Using transition data on individual workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition ‘yield’ at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from non-participation. German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.

A crucial parameter for increasing the retirement age is the early retirement discount of the public pension system. Critics of the present German system argue that the downward adjustment of the pension for early retirees is too small compared with a ‘fair’ system and thus encourages early retirement. We discuss several notions of ‘fairness’ of early-retirement provisions and propose a concept called ‘distributive neutrality’, which states that the ratio between total benefits and total contributions should not depend systematically on the individual’s ability. By applying this concept to the German retirement benefit formula and taking empirically estimated relationships between annual income (as a proxy for ability), life expectancy and retirement age into account, we show that at the present discount rate of 3.6% per year there is redistribution from low to high earners, which, surprisingly, could be attenuated by raising the discount rate.

From a model by Hopenhayn, three hypotheses can be derived: (H1) Firms that exit in year t were less productive in t -1 than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more productive than nonsurviving firms from this cohort in the start year. This paper uses unique newly available panel datasets for all manufacturing plants from Germany (1995-2002) to test these hypotheses. All three hypotheses are supported empirically for West and East Germany.

In their seminal 1971 paper, W. J. Baumol and W. E. Oates analyzed effluent charges and ‘command and control’ regarding their ability to attain a given standard of environmental quality at minimum cost. In the subsequent literature, transferable discharge permits (TDPs) have been added to the portfolio of standard oriented environmental policy instruments. We place these instruments in a dynamic context. Here, cost minimization is defined in an intertemporal setting allowing for induced technical change. It turns out that the relative performance of alternative policy instruments regarding their ‘dynamic cost-effectiveness’ crucially depends on the information available to the involved agents. Under adverse informational conditions, only a TDP system with future markets is dynamically cost-effective.