Volume 9, Issue 4

Suggestions for economic policy reform are regularly confronted with the problem of lacking reform acceptance in the political process and among the general public. So far “Reformstau” is widely analysed as a consequence of collective action failures. In contrast to these approaches based on standard assumptions of rationality this contribution explores behavioral economics explanations. It is shown that prospect theory and related phenomena can help to understand reformresistance. Experimental evidence with respect to current German reform debates is presented which supports this view. Taking account of psychological reform obstacles is shown to be useful to derive reform and communication strategies.

This article offers a conceptual framework for analysing involuntary unemployment using the concepts of justice and income distribution within a market economy. Conventionally, it is argued that involuntary unemployment causes a deadweight loss in social welfare, because it involves the under-use of a productive resource.We explore this efficiency argument with a public choice approach, employing the notion of homo oeconomicus. We contrast this with a perspective using the concept of homo politicus, which stresses social justice. We apply our findings to the special case of German social reform, especially Hartz IV, and show that some of its policy recommendations are in accordance with our analysis.

In the past, the German statutory pension scheme has been exposed to numerous policy interventions. In this article we analyze the effects of the latest reforms on the future development of the contribution rate as well as the public pension level. Furthermore, we quantify the extent of an increase of the average retirement age on the funding of the pension scheme, as the increase can temporarily dilute the financial burden due to demographic transition.

The article explores whether Germany’s position as the world’s leading exporter is something special.We apply a standard gravity model estimating bilateral export flows of 184 countries and find that Germany’s exports are positively affected by time-invariant factors, like its geographical location, but that these factors are not exceptional compared to other OECD countries. Time-varying parameters, like membership in international institutions, also have only limited positive effects on German exports as the positive impact of such institutions is mainly driven by other countries’ willingness to participate. Taken together, Germany’s current status as the world’s leading exporter is not surprising given that it is a middle-sized open high income economy that is neighbor to other open high income countries.

Based on recent developments in competition theory, we analyze key aspects of buyer power. The main perspective that we take is one where buyer power is treated as bilateral bargaining power. This represents a key difference from the more standard approach that views buyer power through the lenses of the monopsony model. We also discuss different ways to measure buyer power and analyze in detail its impact on the competitive process and consumers.

Who is the best Formula 1 driver? Until today it was impossible to answer this question because the observable performance of a driver depends both on his talent and the quality of his cars. In this article we separate for the first time driver talent from car quality by econometrically analyzing data for 57 years of Formula 1 racing. Our estimates also control for the number of drivers finishing, technical breakdowns and many other variables that influence race results. While Michael Schumacher is often believed to be the best driver, he is overtaken by Juan Manuel Fangio and Jim Clark.