Band 7, Heft 3

This paper reviews the nascent literature on „two-sided markets“ which can be characterized by two-sided indirect network effects. It presents key findings in this literature, derives some of them in numerical examples and discusses how these findings improve our understanding of real-world markets. It finally discusses some implications for competition policy.

The recent discussion about the revision of German merger control underlines the relevance of media economic questions. This discussion frequently neglects the particularities of media markets, for example the mutual interconnection of advertising and media markets, i.e. of “two-sided markets”. In this paper the impact of “two-sided markets” on mergers is analyzed. The results indicate that an intensive analysis of each case because of the heterogeneity of each market and a stronger economization of merger control would be useful. The basis for an economization could be quantitative analyses that are conducted using existing market data. The print media market is an example of the peculiarities of “two-sided markets” at which network externalities lead to pricing behavior that deviates from that on normal markets.

The German labor market reforms seem to be on the right track. However, they need to be adjusted especially on the organizational side to make them more effective. The labor market instruments can be concentrated on temporary company wage subsidies, training measures and financial incentives for business start-ups. It is essential to increase incentives, intensify competitive structures and to ensure clear-cut responsibilities.

In April 2002 German government introduced job placement vouchers as a new instrument of active labour market policy to foster the transition of unemployed to jobs. This paper investigates the demand, the treatment effect of the treated and the economic efficiency of job placement vouchers issued from May 2003 to June 2004. The analysis employs a large sample of unemployed individuals from administrative data collected by the German Federal Employment Agency. 20 percent of the West German and 37 percent of the East German unemployed demanded a voucher. According to the microeconometric results the treatment impact of the treated is positive. 5 out of 100 voucher recipients found a job as a result of the instrument. An additional analysis of the cost and returns of the voucher scheme reveals that the return remains positive if no more than 70 per cent of the direct effects are compensated by indirect (substitution) effects.

Evidence using micro data from four international student achievement tests shows that institutional features that ensure competition, autonomy and accountability in school systems are key to high student performance. The lessons that education policy can learn from the cross-country evidence include that students perform better (a) in countries with more competition from privately managed but publicly funded schools, (b) in schools with autonomy in process and personnel decisions, (c) if teachers have both incentives and powers to select appropriate teaching methods, (d) if parents take interest in teaching matters and (e) if students and schools are held accountable by external examinations