Volume 7, Issue 2

This study compares the wages and wage rigidity of entrants with incumbent workers in the West German labour market, based on individual data from 1975 to 1995. On average entrants (around 11 per cent of the workforce each year) wages were 40 per cent lower than incumbent wages, with a rising tendency. Roughly 53 per cent of this difference can be attributed to observed heterogeneity. Further econometric evidence suggests that wage rigidity existed for entrants, with an average estimated yearly wage sweep-up of 2.4 per cent. This presumably was an important reason for rising unemployment in the observation period.

Due to the fact that the unemployment rate of high skilled labour in Germany is about 3% in the last 30 years, this paper deals with theories that account for heterogeneous labour. The main finding is that the reduction of thelabour costs cannot reduce the aggregated unemployment rate substantially. An important conclusion is that the skill upgrading of the labour force is slower than that of labour demand. The future of work in Germany lies not in low paid low skilled jobs, but in high( er) skilled occupation.

Temporary help services (THS) offer firms an additional option for flexible adjustment of employment levels. In addition, THS can facilitate new employment for both labor market entrants and job losers. This survey examines the economic significance, the changing regulatory framework, and the recent development of the THS sector in Germany. Declining wages and rising employment shares in THS are suggestive of a safety valve for the primary labor market, especially for unskilled workers. High markups charged by THS firms despite declining relative compensation of THS workers suggest a high shadow price for this form of labor input.

The recent reform of jobs with reduced social security contributions (the so-called Minijobs) was associated with the expectation that such jobs could serve as a bridge into regular employment for unemployed workers. However, recent experiences with the reform cast substantial doubts on the potential of Minijobs in this regard. Hence, this article develops a proposal for an easily implementable, generous and temporary extension of the current regulation to provide an incentive for unemployed workers to take up such a Minijob. Our proposal is supplemented by an assessment of the expected labor market impact and a monetary cost-benefit analysis.

Thomas Moutos, Professor at the University of Athens once mentioned that Maradona had probably done more for the welfare of Argentina than any economic advice had ever achieved. In this paper we measured the social welfare which will be produced by the German National Soccer Team during the World Cup 2006. In particular, we analyse the utility of the TV coverage and the utility resulting from a success of the German team. Both effects can be seen as public goods. We use the Contingent Valuation Method to quantify the Maradona effect of the German Team. The results show significant welfare gains provided the German team will be successful. Steffen Ra¨tzel und Joachim Weimann 270

The standard principal agent model considers monetary incentives only. It is assumed that money is more efficient than other forms of material, nonmonetary compensation. Awards in the form of titles, orders, medals and honors ( prizes) - though almost omnipresent - have so far escaped the attention of economists. They present extrinsic, non-monetary incentives that operate through the innate desire of human beings for recognition and status. In this article, we analyse the differences between monetary incentives and awards: in general, awards arecheap, lead to interpersonal relationships, are not directly related to performance and have a signalling value. In addition, they support intrinsic motivation, may increase social welfare and are exempt from taxation. Awards present an important additional instrument to be considered in principal agent theory. In many contexts they are superior to monetary compensation.

The aim of the article is twofold. At first, we consider efficiency oriented aspects of public versus private higher education financing. We briefly summarize the market failure debate. We analyse the interplay between uncertainty of the returns of education, individual educational choice and higher education financing. Subsequently, we discuss higher education financing in the presence of distortive taxation and asymmetric information. Then, we consider equity aspects of higher education financing. We review the vast literature providing empirical evidence on the distributional effects and identify possible caveats when it comes to apply the results to the policy debate. We conclude that neither efficiency nor equity arguments provide a convincing rationale for a comprehensive role of the public in higher education financing. We argue in favour of a success-dependent participation of students in the costs of higher education.