Volume 5, Issue 2

The distribution of societal wealth and income is of central importance for the economic, social and cultural development of a country. This article’s contribution is made by pinpointing the situation of the income rich. Sound information about high income, its structure and distribution is presented based on the anonymized individual records of the income tax statistics of 1995 for the first time in Germany (as a part of the first Poverty and Wealth Report). Rooted in a distributional analysis over the entire income range, the article concentrates on the (re-)distribution of high income by different ,richness‘-definitions for the selfemployed and employees.

This paper gives a first appraisal of the „Vermittlungsgutscheine“ the German government has recently created as a new instrument of labor market policy. This instrument is aimed at improving intermediation of unemployed people by inciting private recruiters to place individuals who were formerly advised by the state-run placement-agencies. We analyze the function of the placement intermediaries and discuss how they will respond to the new measure. It is argued that, mainly due to the amount and the short term of the tokens, private intermediaries will not participate in this programme significantly. We also look at the labour market and find that the unemployed individuals mostly do not match the skills the employers are looking for. Thus, we do not think that this instrument will have a noticeable effect on the labour market.

International comparisons of labour market institutions and their transfer across boundaries have gained in importance. The paper deals with the question of the best way to proceed in making such comparisons. At the same time the question of the possibilities and limits to institutional transfer is addressed. On the one hand, competition between systems may oblige governments to adopt institutions of other countries. On the other hand, inflexibilities resulting from path dependency, political constraints on decision-making processes and/or powerful domestic interest groups can impede the transfer of institutions.

This article illuminates a certain side of the modern economy which is beyond the reach of the traditional apparatus of economic theory: the complexity and lack of transparency of the modern economy - its ominous side for humankind and nature. By contrasting the economic understanding of Aristotle and Adam Smith, the founding structures and peculiarities of the modern perception of economy will be highlighted, and economic action set in relation to humankind’s pursuit of a ‘good life’. Aspects of the insatiability, excessiveness and dynamism of the modern economy will be addressed with a specific example, and the fruitfulness of the solutions Aristotelian philosophy has to offer for modern economic problems will be discussed.

Monetary policy rules that take the form of interest rate rules are becoming more and more popular and widely-used in research on monetary theory, and some authors even recommend their use in practical monetary policy. This paper systemizes the variety of proposed interest rate rules and draws connections to their theoretical roots. On the basis of new research results the paper also discusses possibilities of using such rules in practice. Due to a variety of problems the scope for practical use remains very limited.

The paper discusses the ex-ante- and ex-post-incentives that result from different insolvency regimes. It concentrates on the problem of how to evaluate and utilise the debtor’s seizable assets after bankruptcy proceedings are commenced. This is closely related to the problem of creditor co-ordination. We compare the proceedings following the direction of the new German insolvency law with some reform proposals suggested in the literature, such as the auctions approach by Roe and the options approaches by Bebchuk and by Aghion/Hart/Moore. The options approach in particular seems to solve the evaluation and co-ordination problem at low cost.

In this paper, recent accounting scandals in Germany are traced back to a serious incentive problem in German auditing law. Since the auditor depends economically on his client, contrary to the legislator’s intention, a factual forcing contract is established which enables the client to control his auditor’s performance almost completely. As a solution to this problem the proposal of a Demsetz auction of the auditing monopoly is developed, including a mandatory rotation of auditing firms. I shall argue that this proposal not only alleviates the problem of auditing fraud in an incentive-compatible way but may also serve as an effective barrier against concentration in the auditing market.

Rapidly increasing life expectancy is seen by economists as a serious impediment to the financing of social security systems, no matter whether they are funded or not. However, what is less obvious is that these systems themselves may contribute to the increase in life expectancy by distorting people’s incentives to invest in the length of their lives. This paper discusses theories of this moral hazard effect and offers some preliminary evidence on the empirical validity of this theory. I also present an option of reforming traditional social security systems which is designed to reduce this moral hazard effect.