Volume 4, Issue 1

In this paper exact criteria are defined in order to identify a „fair“ remuneration of the labour power. Due to this principle a point of reference is provided which makes it possible to refer to a „just“ level of wages. Thus we are entitled to judge the factual pay as „too high“ or „too low“. Finally an assessment of empirical evidence concerning the factor shares in Germany is given.

It is widely believed that the Information Society and its economic counterpart, the New Economy, afford more flexibility especially in the labour market (i.e. less long-term contracts) to allow faster reactions to the increased speed of change. The paper argues that increased complexity rather than faster change is the real problem. Dealing with complexity affords adaptability and organisational learning. Short-term flexibility, however, is detrimental to adaptability and learning as it hinders the accumulation of firm-specific capabilities - and, consequently, of country-specific ones at the macro level. The ability of the firm to absorb and act upon knowledge depends to a large extent on staff continuity and motivation.

How can European integration be made compatible with maintaining decentrality and variety within Europe? This paper argues that both aims can only be achieved simultaneously by applying the concept of competitive federalism to the EU. After showing that interjurisdictional competition is a logical consequence of the removal of mobility barriers within the EU, basic tenets of the theory of a multi-level system of competing jurisdictions are presented. As a consequence, the EU has to provide an institutional framework for the proper working of interjurisdictional competition. In the second half of the paper, consequences of the application of competitive federalism to the EU are examined, e.g. the possibility that also many public goods and regulations might be provided competitively by lower-level jurisdictions. Finally, the problem of regulatory competition vs. harmonization is discussed, leading on to exploring advantages and problems of decentralised legal systems (legal federalism).

When the Philipp Holzmann corporation declared insolvency many professional observers suggested that the German constructor had fallen victim to the operation of ‘Germany Inc.’. This metaphor meant to blame the close ties between Deutsche Bank and Holzmann as the ultimate reason for the insolvency of Holzmann. This paper challenges the notion that the relationship between Deutsche Bank and Holzmann exemplified ‘Germany Inc.’ and that this was the systemic reason for the disaster. It argues instead that the close connection describes relationship intermediation. Relationship intermediation and bank-dominated corporate control are two sides of the same coin. Like any other form of corporate governance, the bank-dominated variant is not immune against loss of corporate control. In the case of Holzmann, successful relationship intermediation over a long time has presumably prepared the ground for the bank management to remove Holzmann from its main investor’s tight control. In such a disastrous situation and after the total loss of control, it seems natural to liquidate the firm and to pay out the investors. But in this particular case, politicians and the media were reluctant and ultimately refused to apply the rules of investor protection. This experience is likely to impair banks’ incentive to invest in relationship intermediation if they anticipate that relationship intermediation bears the risk of losing part or all of their formal investor rights. This would have a negative impact on both the banks’ readiness to finance firms and the banks’ participation in restructuring distressed firms.

International and regional integration are accompanied by the fear that the reduction of trade barriers might change the spatial distribution of economic activity radically. In the past decade, the ‘New Economic Geography’ has developed as a theory explaining some of the forces which might influence the spatial distribution of economic activity. Since trade costs play a crucial role in this new theory, it is natural to expect the New Economic Geography to contribute substiantially to the understanding of how regional integration might change the economic landscape. This paper reviews the New Economic Geography literature. It turns out that the literature’s theoretical predictions are ambiguous and that the empirical evidence on the theory is very scant so far.

A recent article presents effective corporate tax burdens for a number of countries. Its authors conclude that Germany can be considered to be a low tax country by international comparison, and that a tax reform which aims at reducing the effective tax burden on German corporations is not necessary. In our paper, we critically review the method used for that study. In a second step, we present approaches which we assume to be better suited for such an analysis, and results generated by these approaches. We conclude that Germany cannot be considered to be a low tax country.

Public opinion and politics are strongly influenced by economic theory and economic policy advice. Most of the underlying economic reasoning is based on the assumptions of a universal homo oeconomicus. Whether people act according to these assumptions is an empirical question, however. In this paper we report evidence of controlled laboratory experiments, which clearly indicates that contrary to the standard assumptions, reciprocity and fairness are central motives of human behavior. This has important implications for policy advice. We discuss several examples, e.g., tax moral, the design of the welfare state, hidden costs of incentives, wage rigidities and the economics of crime.