Volume 14, Issue 1-2

Because economic theory alone does in many situations not provide unambiguous policy advice, most of the time empirical analyses are needed in addition. Thus, today econometric analyses are often parts of reports for political institutions or courts. However, it is not unusual that reports with contradicting evidence are presented by different groups or parties. Using the relation between government size and economic growth as an example, it is shown how such contradicting results are possible even if all scientists involved behave sincerely and adhere to the rules of scientific research. Our second example, studies investigating whether the death penalty serves as a deterrent to homicide, shows that the results of empirical analyses might to a large extent depend on a priori convictions of the scientists. Thus, the process of scientific policy advice has to be organised in a way so that - similar to the genuinely scientific discourse - open discussion and criticisms of methods and results are possible. In order to disclose possible conflicts of interests, this demand transparency of the whole process and, in particular for empirical analyses, that data and programmes are made available for re-estimations.

Starting in 2003, the labour market in Germany underwent major reforms. They introduced new types of employment, reshaped the benefit system, and remodelled active labour market policies. Over the 10 following years, unemployment fell dramatically and participation hit record levels, while rising non-standard employment and wage inequality became causes for concern. The Bundesagentur für Arbeit has developed into a modern service provider whose programmes are scientifically evaluated. Anticipating future trends on the labour market, the Bundesagentur has recently devised a strategy to cope with them. Overall, the German experience with labour market reforms points to the benefits of evidence-based policies.

After describing qualitatively the increasingly flexible organization of work hours in Germany, I turn to the German Socio-Economic Panel to quantify practices and trends, and assess their effects on workers and employers. Measuring flexibility as the extent to which overtime is compensated with time off, and hence receives no overtime premium, I show that hourly-paid workers have undergone a regime shift towards more flexibility since 1984, while salaried workers have maintained an already high level of flexibility. I find weak evidence that flexibility causes workers to be slightly less satisfied with their work and more satisfied with their leisure. Over the boom and bust cycle of 2005-2009, I find that for hourly-paid workers in manufacturing, paid and unpaid overtime hours were equally cyclical, but that the cycle for unpaid overtime led the cycle for paid overtime. The results suggest that while the new practices do free employers to make more cyclical adjustments in hours, they have not eliminated the need for adjustments in paid overtime. I identify as constraints ceilings on cumulated overtime hours to be compensated with time off and the window within which the compensation in time off must occur.

Academics in the field of economic sciences are increasingly expected to solicit (research based) third party funding, even in competition with other disciplines. The recent Excellence Initiative in Germany, in which economic sciences have performed disappointingly, has shown this pressure quite plainly. This article gives an overview of the main funding programmes of the DFG (German Research Association), the assessment and decision-making process in these programmes and discusses the position of economics in the DFG funding context.

Travel time savings are usually the most important utility component of transport projects. This paper shows estimation of the value of travel time savings (VTTS) with particular focus on random parameter models. Employing these models commuters’ VTTS in the German City Dresden is estimated. Results show that travel time savings of motorised and non-motorised modes are valued differently, VTTS derived in this study are higher than values currently used in Germany’s federal transport infrastructure plan and VTTS are dependent on travel time.

Economists have a hard time to predict macro-institutional developments. Missing are predictions based on tried and tested hypotheses. Why not apply proved microinstitutional hypotheses to macro-institutional problems like the European Economic Union (EMU)? We try to do that. The international gold standard serves only as counterexample. We discuss the sustainability of EMU (= stability of the euro) using a number of welltested hypotheses of institutional economics - up to the explanation of firm mergers. Yet different from business mergers, to endure, mergers of states must become self-enforcing entities, which requires ideological (cultural) integration of its citizens.