Volume 52, Issue 2

The German system of unemployment insurance has failed to prevent the rise of unemployment over the past decades. The authors suggest replacing the existing federal unemployment insurance by a dual-system model of private unemployment insurance that includes incentives on the side of employees as well as of employers to reduce unemployment. They calculate the statistic fundamentals of a dual system of private unemployment insurance, using data of the year 2000. It is shown how much the individual employee would have to invest for a variety of unemployment payments and for a variety of individual “real” risks. In addition, it is demonstrated that each individual can reduce his insurance premium by simply declaring a higher degree of regional, professional, or income-related mobility. On the employers’ side it is elaborated that, via autoregressive processes, employment increases, and that at the same time each employer reduces the rate of his firm’s unemployment tax.

Any policy measure aimed at reducing high unemployment in Germany needs to tackle the substantive disincentive effects that unemployment assistance and social assistance have on labor supply. The article elaborates on a reform proposal presented by the German Council of Economis Experts in ist Annual Report 2002/2003. Abolishing unemployment assistance would allow for a reform of social assistance that considerably increases the incentive to search for work by lowering the reservation wage as well as the marginal effective tax rate on income earned on the labor market.

In his paper Martin Werding proposes “Public pension entitlements according to the number of children: arguments for an unpopular idea”. Proposals to curtail public pension entitlements for those who have no children, thus shifting the burden involved in pension reform that is necessitated by demographic ageing mainly to this sub-group of insured individuals, are provoking heated debates. Nonetheless, the idea is defended here arguing that unfunded public pensions are essentially based on aggregate human capital investment in which the childless are less engaged than those who have children. There is a role of childless individuals in co-financing child-related benefits and public education, which can give rise to pension entitlements for these people as well, but the current system in Germany is far away from balancing the relevant financial burdens and claims on the return to expenditure on children across the population. There are thus good reasons to reflect the current asymmetries within an alternative benefit formula for the German public pension scheme. In his article Hans D. Barbier comments the debate on the consolidation of pension funds’ finances. It is wrong to claim that the old-age pensions are safe. One of the risk factors is the demographic development: this shows the problem of a fictional inter-generation compact. But there are grave arguments against an economic punishment of childlessness, e. g. against the simplified formula to shorten the retirement pensions of people without children by half. In his article Axel Börsch-Supan discusses the impossibility of defining a practical concept of “justice between generations”. He argues that the concept - understood as an equal treatment of generations - is ill-definded and lacks practical applicability because it is impossible to unravel the historical starting point of each generations life course in a world characterized by non-stationarity and sudden events such as wars, economic crises, baby booms and baby busts.

While some developing countries caught up economically with advanced industrial countries, low or even negative growth of per capita incomes in various developing countries resulted in widening income gaps during the process of globalisation. This article explores three possible explanations for divergent growth patterns: (i) the reluctance of developing countries to implement the policy prescriptions of the so-called Washington consensus; (ii) the failure of traditional recipes of macroeconomic stabilisation and structural adjustment; and (iii) deep-rooted obstacles to growth that were ignored by many policy-advisers. According to the correlation results presented, the notion that economic policy matters for growth cannot simply be dismissed. However, there is little evidence supporting the view that lacking reform-mindedness explains the weak growth performance of most developing countries. Economic policy appears to be constrained in important ways, particularly in the poorest countries. Openness to trade and foreign direct investment turns out to be less effective in stimulating growth in this country group than in more advanced countries. Furthermore, it is mainly for poor countries that path-dependent institutional deficiencies and geographical disadvantages have a significant impact on the quality of economic policy and the growth performance. Hence, development cooperation must go beyond the Washington consensus for more developing countries to escape the poverty trap.

This paper analyzes the role of trade sanctions in the pursuit of political aims. We show that sanctions are mostly ineffective and have adverse distributional consequences. The example of South-Africa, in which case several court processes are pending, serves as an illustration of this general finding. In this particular case, the failure of sanctions can be attributed to the inconsistent policies of the sanctioning countries, rather than to failures of enterprises to adhere to official policies.

In the context of the discussion of the new financial architecture the idea of a Tobin tax is revived. Mainly due to the pressure of several non-governmental organisations (NGO’s) the Tobin tax is currently discussed seriously in various policy circles. Recently, the German Federal Ministry of Economic Co-Operation and Development has commissioned a feasibility study on the implementation of a Tobin tax. The study was written by Paul S. Spahn (2002). This article discusses the feasibility study critically and points out its main deficiencies.