Volume 11, Issue 2

We compare German institutions of tertiary education (universities and polytechnics) with respect to the cost of and the returns to their educational degrees. Based on cost data from two different sources we find that on average the expenditures of universities are lower than those of polytechnics when we consider expenditures per potential enrollee and per student enrolled during the regular education period. We apply data from the German Socio-economic Panel (2001-2007) to estimate the private returns to tertiary education and find higher returns to university than polytechnic training. These results are robust to a variety of alternative procedures.

This paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis. We consider two scenarios: a proportional income shock and a shock on employment which increases the rate of unemployment. We find that automatic stabilizers absorb 38 percent of a proportional income shock in the EU, compared to 32 percent in the US. In the case of an unemployment shock 48 percent of the shock is absorbed in the EU, compared to 34 percent in the US. Under the assumption that only credit constrained households adjust current spending on consumption goods to current disposable income, the cushioning of disposable income leads to a demand stabilization of 26 to 35 percent in the EU and 19 percent in the US. There is large heterogeneity within the EU. Automatic stabilizers in Eastern and Southern Europe are much lower than in Central and Northern European countries. With respect to income stabilization, Germany is above the European average for both scenarios. Demand stabilization in Germany is weaker because the number of liquidity constrained households is below the EU average.

This paper examines the stabilizing effects of Swiss fiscal policy. First, we find that the federation adopted a countercyclical fiscal policy in approximately 60% of all periods observed. During recessions, fiscal policy was always countercyclical and therefore helped to stabilize the economy. In case of the cantons, fiscal policy was countercyclical in 55% of all recessions. In recent years, there has been a trend for both the federation and the cantons toward stronger stabilization. Second, the two stabilizing instruments of fiscal policy, automatic stabilizers and discretionary fiscal policy are compared with each other. Over the last 50 years, automatic stabilizers have been expanded continuously, particularly on the federal level. We find that the impulse of automatic stabilizers is about twice as large as the one of discretionary fiscal policy. Third, macroeconomic effects of Switzerland’s fiscal policy during recessions are examined. Automatic stabilizers have been particularly effective in the cantons whereas the effects of discretionary fiscal policy on economic growth have tended to be weaker.

The volume of short-term liquidity credit (“Kassenkredit”) of the German municipalities has increased rapidly in the last two decades. This development suggests that this debt instrument has been diverted from its original purpose, namely as an instrument of bridging short-run liquidity shortfalls. In this paper we analyze the reasons for this development - from a legal and institutional perspective on the one hand, and from an economic perspective on the other hand. One key result of the analysis is that this development is partly due to the lacking intervention of municipal supervision institutions from the L¨ander (German Federal States). Obviously, the Länder tolerate the abuse of the Kassenkredit in order to avoid more open types of debt. In addition, we investigate how the introduction of the doubly-entry bookkeeping in the municipalities affects the (improper) use of short-term liquidity credits. Finally, we point to the potential of the municipal Kassenkredit as a loophole in the new German constitutional debt brake.

This submission deals with an alternative to the German Inheritance Tax Reform Act 2009 in form of an inheritance tax with a broad tax base and low tax rates. In contrast to the new German Estate Tax Act we analyse an inheritance tax reform proposal that provides no tax relief for particular asset categories but contains low proportional tax rates. Our empirical analysis shows that abolishing of tax exemptions and market valuation of assets lead to a remarkable broadening of the inheritance tax base and enables substantial tax rate cuts.