Volume 9, Issue Supplement

Recently available evidence emphasizes the role of cognitive skills in determining not only individual earnings but also national growth rates. While prior studies concentrated on just school attainment as a measure of human capital, the availability of more refined quality measures using student achievement assessments demonstrates the inadequacies of these pure quantity measures of schooling. Improving cognitive skills, such as those measured by PISA, has, however, proved difficult. The only viable approach appears to be improving the incentives for higher performance. But particularly the reactions to demand-side incentives indicate a requirement to focus incentives carefully on achievement.

The German economy is highly specialized in incremental innovations. A number of high-technology industries have established themselves in Germany only slowly over the last decades. Innovation policy has tried to support the startup of high technology enterprises, e.g., by improvements for certain types of finance, incentives for founders and the reformof technology commercialization at universities. However, these measures have been counteracted by the German tax system which affects innovation adversely in some parts. Moreover, the emerging shifts in the age structure of the German population could affect innovation incentives and entrepreneurship negatively. Another important demographic aspect is the dominance of men in science and technology. Stronger participation by women in male-dominated scientific and technical professions could compensate partially for the effects of changes in the age structure.

Since the mid-1980s, growth theorists have increasingly focused on human capital as a source of long-run economic growth. Recently, however, a number of studies have documented that the social returns of human-capital investment are fairly small, implying that the contribution of human capital to economic growth is smaller than previously thought. In this article, I analyze the relationship between human capital and economic growth in the context of unified growth theory, which aims to explain the transition of countries from pre-industrial stagnation to modern economic growth. My main finding is that human capital matters for a successful transition from stagnation to growth not just because of the productivity effect of human capital that the existing literature has focused on, but also because human capital can serve as a trigger of political reforms, which in turn sustain and accelerate the transition to growth.

Considerable improvements in the measurement of costs and benefits of apprenticeship training from the perspective of training companies have been made in the past few years. They have helped to better understand, why some firms train and others do not. With these micro-data sets we are also able to analyse measures that would help to increase the supply of training posts in an economy. A simulation of the impact of financial incentives on the training propensity of firms is made and shows that such a measure would be highly inefficient from an economic perspective. Further improvements in data are expected and should give valuable guidance in the design of educational, fiscal and labour market policies with respect to apprenticeship training.

Despite its efforts and obligations under the Kyoto Protocol, the EU has not succeeded in even making a dent in the rapidly rising trend of worldwide carbon dioxide emissions. If anything, the trend has accelerated in recent years. In his Thünen Lecture given to the Verein für Socialpolitik in October 2007, the author criticizes the attempt to slow down global warming by means of unilaterally curtailing the demand for fossil fuels and develops an intertemporal supply side approach to the economics of global warming. He advances the hypothesis that the ineffectiveness of demand policies results from anticipation effects on the part of the owners of fossil fuel resources. In addition to the threat of potential ousting by domestic rivals, the threat of falling energy prices (against a modified Hotelling trend) due to greening public policies and increasing participation in worldwide emissions trading systems gives resource owners the incentive to speed up extraction. Feasible policy measures that do not encounter such problematic anticipation effects include the rapid creation of a complete worldwide monopsony for fossil fuels that can dictate quantities rather than having to rely on price signals. Moreover, source taxes on the financial returns of resource owners will provide additional conservation motives; technical measures including afforestation and sequestration may also be a way to reduce the speed of global warming.