Volume 68, Issue 1

Productivity growth in many advanced economies has decelerated in the last decades. There is increasing evidence that the misallocation of production function has contributed to the weakness in productivity. Factors behind this misallocation could include low interest rates or credit booms. In this paper, I evaluate the most recent findings on the impact of misallocation of production factors on productivity and assess their role for the weakness in productivity growth in Germany. Overall, the misallocation of production factors seem to have been less important in Germany than in other advanced economies. Behind the backdrop of the low interest environment has been in place for an extended period of time, the risks that productivity growth is damped due to the misallocation of production factors is increasing.

The current discussion in German policy circles suggests a strong scepticism towards foreign takeovers of German firms. This essay takes issue with this. It is firstly argued that Germany in actual fact receives relatively little inward investment. The essay then discusses the potential benefits from inward FDI which could also benefit the German economy. It then briefly reflects on the German policy initiatives which seem to be based on a fear of investment from China – though it is not clear at all what this fear is based on.

There are good economic arguments for preventing non-EU-foreign investors, especially from countries with an incomplete market economy such as China, from taking over or acquiring controlling stakes in European companies with strategic relevance. These arguments apply not only in the context of military relevance or critical infrastructure, but also for some areas in which Europe today has a technological leadership role. In some cases, incomes in Europe can be maximized by preventing technologies and economic clusters to diffuse too quickly globally. However, intervening in cross-border mergers comes with economic costs. Hence, clear rules should be designed to determine whether such mergers and acquisitions should be prohibited, and interventions should be kept to a minimum.

Based on a survey among more than 5,000 German household heads, this article investigates their willingness to pay (WTP) for avoiding power outages using Contingent-Valuation -Methods (CVM). Alternatively, we ask respondents to estimate the WTP of a hypothetical household. This Inferred-Valuation -Method (IVM) is an approach introduced to reduce the hypothetical bias of stated WTP. Our empirical results indicate that, relative to the CVM, the IVM yields inflated WTP values, casting doubt on the validity of the IVM.

In 2020 the new fiscal equalization system will come in force. One problem of the new system seems to be, that local tax revenues (e. g. local trade tax) are subject to much higher redistribution than under the status quo; the maximum of redistribution is higher than 100 %. But these results do ignore, that taxes could be seen as co-products. If e. g. the base of the local trade tax increases, the base of the corporation tax will raise, too. So it is not possible, to change only the revenue of one tax like the former analysis imply. Having this in mind, a simulation analysis shows, that the redistribution will always be lower than 100 %.