Volume 8, Issue 4

This article surveys the empirical literature on the effects of discretionary fiscal policy on the German macroeconomy. Although the qualitative and quantitative effects of fiscal policy are often discussed among politicians and in the public, economists only recently renewed their interest in this topic and have produced only few empirical studies for Germany so far. While older macroeconometric models generally predict positive effects of expansionary policies on output in the short run, newer SVAR studies disagree on the direction of the expected effects. There is, however, some agreement that the effects are likely to be small.

This article analyses public debt differences across industrial countries with a special focus on Germany on the basis of political economy approaches. We are interested in identifying the empirically relevant theories in order to draw conclusions for Germany based on international differences in the preferences of the political agents and/or in the political or budgetary institutions.We discuss the recent developments in Germany - notably the reform of the distribution of competencies between the federal and the state level - and conclude that the current situation provides some opportunities to address the issue of public debt.

In economic literature comparisons between the American and German Council of Economic Advisors lead to the result that the American Council works quite well, whereas the German Council is broadly criticized. On a closer look, these conclusions are disputable. Therefore, in this contribution we analyse both institutions with respect to different functions of scientific advice such as: (1) operative advice, (2) conception, (3) information of the public, (4) legitimization, and (5) filter. Our approach shows that the simultaneous treatment of all functions by one institution is impossible. Finally, the institutionalization of the German Council is quite appropriate with respect to some functions of scientific advice.

This article presents the results of a survey among the members of the „Verein für Socialpolitik“, the association of German speaking economists, containing questions on schools of thought, economic role models and policy issues. A probit analysis is used to identify to what extent ideological preferences or personal facts determine the respondent’s opinion. Some of the questions were already asked a quarter of a century ago so that it is possible to track the changes in view among economists. One of the most important findings is that neoclassical economics has become more strongly accepted.

We analyse two recent proposals suggesting the subsidy of social security contributions in order to increase employment in the low wage sector in Germany. Our findings based on a behavioral microsimulation model show: First, both reforms have only small effects on labor force participation and modest positive effects on total working hours. Second, a subsidy based on individual earnings rather than on family income is more favourable to employment as it avoids the well-known negative work incentives of secondary earners.

Although they would promote the common welfare, many political projects are never implemented in democracies. In our article, we make two proposals - incentives for far-sighted policy and reelection thresholds - that could alleviate this problem and enhance any liberal democracy’s efficiency without endangering its founding values.