Volume 2, Issue 3

In order to smooth the transition from a planned to a market economy, labour market policies were applied to an unprecedented extent in East Germany. This paper analyses the effects of these policies. As it turns out, labour market policies not only were largely unsuccessful; in many cases they were even prejudicial to the unemployed as well as to regular employees.

The suggested changes to German orthography are among last year’s most fervently debated topics. The article identifies the individual and collective costs and benefits of such a change and, from the point of view of standardization economics, inquires into the conditions under which such a reform can be expected to be successful.

In spite of its long history, reform of financial equalization at local government level has not brought the necessary improvements in efficiency. Therefore, it is surprising that the criticized West German system was transferred almost unchanged to the East German Laender in the course of reunification. Obviously the politicians were in conflict between testing new promising alternatives and preserving the calculable institutional structure. Therefore, this paper compares the financial equalization law of two Laender (Baden-Wuerttemberg and Saxony) in order to research its suitability under different socio-economic conditions. In the analysis we can clearly show the impact of socio-economic characteristics on the carrying ability of institutions, so any transferability of local financial equalization systems has to be rejected.

In knowledge-based economies the effective use of new knowledge is the most important determinant of economic growth, and the capacity to generate and diffuse innovation forms the basis of comparative advantages. Transaction costs are the main reason why new knowledge takes so much time to spread around. Since clusters attract new ideas more easily, transaction costs may also cause regional divergence. European diffusion policies should therefore aim to minimize transaction costs for exchanging knowledge. It is proposed that this could be done by supporting extra-legal contractual relations guaranteed by third parties and by building up a rating system for trustworthiness of transaction partners.

Since the current German government has stepped into office, there have been numerous corrections to the `pay-as-you-go-financed’ Social Security system. Adjustments to both the pressure of demographics and the labour market will have severe intergenerational impacts, which are reported with the help of generational accounting. Our findings suggest that the recent reform proposals do in fact reduce the burden on future generations. In the early version of the reform proposal mainly the younger generations paid the price, whereas the version which has been passed into law shifts most of the burden to the elderly.