Volume 6, Issue 1

The article illustrates how the integration ofmodern theory of finance and stochastic dynamicmacroeconomic analysis provides a deeper understanding of the link between asset prices and consumption. It shows that this approach gives only a partial explanation for recent trends in US consumption. Comparing wealth effects in Anglo- Saxon countries with continental Europe, the article provides a perspective of the challenges for European monetary policy arising from wealth effects on consumption.

Because the existing environmental liability regimes in Europe do not deal with environmental damage as such, e.g. damages to biodiversity, the European Commission has recently proposed a Directive on Environmental Liability. One crucial aspect of the design of the directive is whether the damage should be compensated in monetary terms or based on natural restoration and how the size of the damage should be calculated. The current proposal is mainly based on the US Oil Pollution Act (OPA), which largely abandoned the concept of monetary compensation. Instead, it relies on a resource-based compensation and mainly measures the cost of compensatory restoration. This article discusses whether this is acceptable from an economic point of view or whether monetary valuation should be used to a larger extent.

In July 2003 the European Parliament and the Council have started a new era of environmental regulation by establishing a nationwide open emission trading system for the European Union. In this article we firstly critically discuss the institutional rules set by the EU-directive. Secondly, we analyse consequences for the national allocation plans. Furthermore, we discuss the allocation rules for emission permits, which are currently under consideration for Germany. In particular we focus on output-based versus emission-based allocation rules and on treatments of new entrants and firm exits. We argue that free permits should only be allocated due to either historic output or historic emissions. We further argue that new entrants should not get any free permits and that firms which leave the market should not lose their permits assigned for future periods. Finally we discuss interaction of emission trading and related instruments such as eco-taxes, and subsidies for renewable energy.

This article uses individual supermarket prices and analyses to what extent absolute deviations from the law of one price are attributable to transaction costs. The results indicate that absolute percentage price differences increase with distance, but at a decreasing rate. Similarly, crossing borders increases price deviations, while being inside the former Belgo-Luxembourg currency union has the opposite effect. This result nurtures the hopes that the euro may be able to reduce regional and cross-border price differences in the long term.

„Who pays what and to whom?“ This is one of the central questions in the German health care system. This question must be answered to guarantee a sustainable system of financing. Taxes, social security contributions, health insurance premiums, co-payments, and out-of-pocket expenditures are internationally under review. The process of spending these ressources in order to pay health care services needs not only a solid analysis but a major reform as well. The basis of this article is a new framework including a minimum insurance obligation (basis health care for all) with freedom to choose between different health insurances and benefit structures and through different service packages. The minimum insurance obligation includes more competition within the production of health services, a decoupling of contributions from the wage bill and the build-up of more capital. Innovations in financing, providing and reimbursing health care services are indispensable for a cost-effective health insurance and health care provision that meet the needs of the population.

According to the ruling of the Federal Constitutional Court of Germany it is unconstitutional if members of the mandatory insurance against long-term care have to pay contributions that are not conditional on the number of their children. This article takes a critical view on child-related contribution payments. It is argued that such a policy is not well targeted and not well founded in welfare economics.