Volume 52, Issue 3

The European Union is characterised by large and persistent disparities across regions concerning income distribution and unemployment rates. European Structural Funds (ESF) have been raised to narrow income differences and foster employment in lagging regions. The paper describes the ESF and argues that they are counteracted by national policies using the theoretical framework of New Economic Geography. The agglomeration of economic activities in some regions can cause unemployment in other regions of the same country since the national wage structure is compressed. National transfers to peripheral regions with high unemployment prevent unemployed people from moving into the core. Assistance from the ESF to peripheral regions enable countries to continue inefficient national wage and transfer policies. In this respect, the ESF must not aim at fighting unemployment but should be restricted to lessen income disparities.

In their paper Thomas Döring and Bernd Hansjürgens refer to the reform discussion of local public finance in Germany. Against the background of rising expenditures and lower revenues a fiscal reform on the local level is absolutely necessary. Such a reform should focus on both the expenditure and the revenue side of the local budget. With respect to expenditures a new division of functions between the upper governmental levels and the local level should be taken into account. With respect to revenues reforms are needed that facilitate communities’ ability to raise revenues from own sources. It becomes apparent that the current political discussion which focuses on the centralisation of the costs of unemployment and on the reform of the local business tax is much too narrow to solve the fiscal crisis on the local level. Johanna Hey argues that the upcoming reform of the municipal finance system gives the chance to overcome the sufficiently well-known problems of the German local trade tax. Although the starting point of the discussion is the deficit of the municipal budgets the author calls for a conceptual framework. The sole goal of raising additional revenue will not lead to a rational tax system. As other taxes local taxes have to be designed in accordance to the ability-to-pay-principle, since it is impossible to define a tax base equivalent to the cost of public goods. The author compares the three recently discussed models. From a systematic and constitutional point of view the abolishment of the trade tax and implementation of a local surcharge to the personal and corporate income tax is the most favourable option for reform. Juergen B. Donges recommends a complete overhaul of local taxation systems according to the principles of pay-as-you-go and of allocative neutrality. Ideally, local public revenues should be mainly based on charges levied directly on users of local public services. But the nature of some public services make taxes a better source of revenues for municipalities. The author suggests three kinds of taxes: First, the already existing real property tax (Grundsteuer) based on an assessment closer to market values. Second, a new local corporation tax (“allgemeine Betriebssteuer”) will be introduced; it would replace the existing trade tax on income (Gewerbesteuer) which is fundamentally deficient. Third, a new local personal income tax (“allgemeine Bürgersteuer”) will be imposed, intended to replace federal income tax transfers for local authorities and local shares of value added tax. In any case, a reform of local taxation should not lead to higher overall taxation. Each local government should freely choose its own levels of taxation, meaning efficiency gains from competition of public services at a local level.

In this paper we analyze the economic effects of the European Court of Justice’s (CoJ’s) jurisdiction on national health care systems in Europe, especially in Germany. We focus on the CoJ’s decisions concerning European patients’ rights to choose freely among suppliers of medical treatment within the European Union. The results are that national health care systems will face an increasing pressure to comply with the rules of the European Treaty. For Germany, this means that some traditional traits of its regulatory framework, especially the principle of territoriality, will have to undergo a test of “Europe-friendliness”. Unlike these qualitative aspects, we find that quantitative effects will remain more or less negligible for the nearer future and will mostly be confined to the sector of advanced technology medicine.

The transformation of former socialist economies in Central and Eastern Europe is a still continuing long-term process. Since explanations and political recommendations by mainstream economics have not been sufficient, research on methodology and theory of transformation is necessary still today. In this paper an evolutionary approach will be introduced to explain the phenomenon of “transformation” as borderline case of long-term institutional evolution. In concrete it will be described as adaptive-imitative step within institutional competition caused by “exit” and “voice” in the Hirschman sense, initiated by political entrepreneurs, channelled by cultural restriction and path dependency and - as consequence of the evolutionary approach - independent of scientific valuation.

This article analyses and compares three in reality observable instruments designed to promote regional development: opening bonuses, advertisement and light-house-policy. We undertake the hopeful attempt to figure a marketplace of industrial locations where location-seeking mobile factors and location-offering jurisdictions exchange goods providing reciprocal advantage. Observing that location- seekers are unable to attain full information about the locations quality we show the importance of signalling. An undemanding model answers the fascinating question how tax-reductions for new direct investments, ads and the so called “light-house-policy” known as a specialty of East-German regional marketing can mitigate the risk associated with decisions of industrial location. Zusammenfassung Dieser Aufsatz unternimmt einen von der aktuellen Forschung zum Thema Standortwettbewerb bisher nicht angestellten Vergleich absatzpolitischer Mittel auf Produktmärkten mit Instrumenten des Standortmarketing. Wir widmen uns dieser viel versprechenden Analogiebetrachtung und illustrieren sie anhand der Figur eines Standortmarktes, auf dem standortnachfragende mobile Faktoren und Standortanbieter (Jurisdiktionen) Leistungen zu beiderseitigem Vorteil tauschen. Aus der Beobachtung, dass Standortnachfrager nicht vollkommene Kenntnis über die Standortqualität erlangen können, leiten wir die Existenz von Informationsasymmetrien zuungunsten der Standortnachfrager ab und zeigen in diesem Zusammenhang die Nützlichkeit von Signalstrategien auf. Ein einfaches Modell dient hierbei dazu, die spannende Frage zu beantworten, inwieweit Ansiedlungsprämien, Werbung und das vor allem in Sachsen zu Berühmtheit gelangte Instrument der Leuchtturmpolitik taugen, diese Informationsnachteile für die Standortnachfrager abzumildern und das mit Standortentscheidungen verbundene Risiko einem höheren Maß an Kalkulierbarkeit zugänglich zu machen.