Volume 7, Issue 1

The article advances the hypothesis that Germany is unable to increase its gains from trade despite increasing trading volumes. High and rigid German wages largely result from the minimum wage constraint imposed by a welfare state that offers generous replacement incomes. Confronted by low-wage competition from post-communist countries, Germany overspecializes in capital intensive goods, which creates a pathological export boom in terms of added value produced in exports. In addition, the country overspecializes in downstream activities, which implies that export quantities grow faster than value added. The reasons which induce extremely high exports are the same as those which cause unemployment to rise and the economy to stagnate.

The goal of a simplification of the tax system can be made tractable by reference to the measure of compliance costs. These must, apart from the tax declaration costs, comprise the costs of tax planning that individuals are willing to bear to avoid taxes. Crude forms of taxation lower declaration costs and give rise to tax avoidance planning through unequal tax burdens. Tax simplification by means of lowering tax compliance costs must pay attention to both types of costs. Altogether, the potential of a reduction of tax compliance costs is thus lower than hoped for.

The debate about Germany as a high or low tax country is nourished by the fact that different concepts of measuring the effective tax burden of company profits arrive at contradictory results. Depending on the indicator used, the tax burden of firms is high or low in international comparison. We discuss the reasons for differences in results and propose an indicator which combines competing measurement concepts and can thus be understood as a synthesis of both.

The focus of this study is on the interrelations between ageing societies and capital markets. In this context, a number of interesting questions arise, which this study discusses: What is the future role of capital markets for old-age provisions? Which investment alternatives will gain importance? How will savings in general be affected? What is the impact on securities prices? How likely is a so-called asset meltdown ( i.e. a rapid fall in securities prices due to a withdrawal of assets by the retiring baby-boomer generation)? Can international diversification help to mitigate such negative effects? Our study is based on a survey among financial experts. Their assessment of the effects of ageing societies on capital markets is presented and discussed.

In this article it is argued that overregulation in the German banking industry is driven by deficient incentives. One important piece in this picture is the rule that resources used by the supervision authority are financed, basically, through an industry tax. Overregulation arises in such a context because the social cost of regulation is neither internalised by the supervision authority nor by the government. The natural antagonism of the industry against too much regulation is attenuated because of a highly unequal impact of the regulation cost on different industry groups. In line with this picture we present evidence in favour of the hypothesis that international harmonisation in banking regulation evolved as a means of overregulation.

This article analyses the reformprocess in the European and the German natural gas sector. Competition in the industry and intra-European trade have been underdeveloped thus far. We argue that the European gas pipelines are a monopolistic bottleneck that require some form of access regulation, e.g. in the form of an Entry-Exit System. We discuss how regulation should be implemented at the European level and, subsequently, in Germany. We conclude that the European Gas Directive 2003/55/EC and the new Energy Law in Germany offer a good point of departure for further reforms towards an integrated European market for natural gas.

The ‘Gesetz zur Reform der Professorenbesoldung (ProfBesReformG)’ lays down that the pay of German professors shall be linked more closely to their actual performance. Furthermore, total payment to all professors shall be fixed in advance. Combining both characteristics leads to an incentive scheme which is well known in labor economics - a tournament or contest, in which agents are rewarded according to relative performance. In this article, the results of the tournament theory are used to discuss possible advantages and disadvantages of the ProfBesReformG. In principle, the ministry of each federal state has to choose between two alternative ways in organizing a professors’ tournament. There can be either a tournament within each faculty, or a tournament between different faculties. Unfortunately, both alternatives are problematic for different reasons.

This article discusses legal, economic and political aspects of the German compulsory military service. We argue that Germany should introduce a professional army because it is more efficient and less prone to cause problems with vertical and horizontal tax equity. In addition most of the political arguments supporting the conscription system are no more valid. Contrary to the opinion sometimes stated by the ministry of defence the present German legal system does in principle allow for a professional army. Hence, there is no reason to uphold the present unfair and inefficient conscription system.