Volume 12, Issue 2

The paper proposes a panel cointegration analysis of the joint development of government expenditure and economic growth in 23 Organization Economic Cooperation and Development countries. The empirical evidence provides indication of a structural positive correlation between public spending and per-capita gross domestic product (GDP), which is consistent with the so-called Wagner’s law. A long-run elasticity larger than 1 suggests a more than proportional increase of government expenditure with respect to economic activity. In addition, according to the spirit of the law, we found that the correlation is usually higher in countries with lower per-capita GDP, suggesting that the catching-up period is characterized by a stronger development of government activities with respect to economies in a more advanced state of development.

Unemployed workers in Austria do not lose their unemployment benefits (UI) if they work in a job where their earnings are below a certain threshold [‘marginal employment’ (ME)]. ME might improve their labour market status by signalling effort, or worsen it through reduced job-search effort. Those who work in ME while claiming UI have less employment and lower earnings afterwards than those who do not. The penalty lessens over time but is still present after three years.

During the last decade, many Western economies reformed their welfare systems with the aim of activating welfare recipients by increasing welfare-to-work programmes (WTWP) and job-search enforcement. We evaluate the short-term effects of three important German WTWP implemented after a major reform in January 2005 (‘Hartz IV’), namely short training, further training with a planned duration of up to three months and public workfare programmes (‘One-Euro-Jobs’). Our analysis is based on a combination of a large-scale survey and administrative data that is rich with respect to individual, household, agency level and regional information. We use this richness of the data to base the econometric evaluation on a selection-on-observables approach. We find that short-term training programmes, on average, increase their participants’ employment perspectives. There is also considerable effect heterogeneity across different subgroups of participants that could be exploited to improve the allocation of welfare recipients to the specific programmes and thus increase overall programme effectiveness.

We present an endogenous growth model with externalities of capital and elastic labor supply where we allow for public debt and welfare-enhancing public spending. We analyze different debt policies as regards convergence to a balanced growth path and their effects on long-run growth and welfare. Three budgetary rules are considered: the balanced budget rule, a budgetary rule where debt grows in the long run but at a rate lower than the balanced growth rate and a rule where public debt grows at the same rate as all other economic variables but where it guarantees that the intertemporal budget constraint is fulfilled.

This paper starts by describing the composition of monetary policy committees (MPCs) in inflation-targeting and non-targeting countries. The experience of MPC members on their inflation performance is then compared, opposing inflation targeters with non-targeters. Our sample covers the major Organization for Economic Cooperation and Development countries, in the period 1999-2008. Our results first show that MPCs are different in inflation-targeting (versus non-targeting) countries. They also reveal that policy-makers’ backgrounds influence inflation, and that the influence of MPCs’ experience is much greater in inflation-targeting countries, while size effects are more important for committees that do not target inflation.

In a recent issue of this journal Gischer and Stiele (2009) applied the ‘Test for ‘‘Monopoly’’ Equilibrium’ advanced by Panzar and Rosse (1987) to German savings banks and came up with the claim that savings banks maximize profits under conditions of monopolistic competition in the meaning of Edward Chamberlin. Their proposition is not conclusive since it would require free entry and for savings banks to operate under increasing returns to scale. Available evidence, however, shows them being subject to constant or decreasing returns to scale. The empirical findings of Gischer and Stiele can more convincingly be explained by assuming savings banks abide by their legal goals to pursue the public interest.