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This paper presents a comprehensive view of lifetime taxation including both explicit taxation through the general tax system and implicit taxation via the retirement benefit formula. Differences in productivity between individuals are unobservable, which provides a rationale for the use of distortionary taxes. It is shown that the optimal structure of age-dependent taxation can be characterized by a generalized Ramsey formula. Furthermore, the paper derives the optimal retirement benefit formula in the presence of the general tax system and examines the compatibility with the financial stability of the pension system. [ABSTRACT FROM AUTHOR]

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This paper analyses the relationship between the German Kiel Institute of World Economics and the Rockefeller Foundation in the years 1925-1950. It focuses on the role of politics in the promotion of science and shows the great difficulties the foundation had in developing a strategy to react to the Nazi’s seizure of power in 1933. The Kiel Institute disguised itself as an unpolitical and “objective” institute and managed to regain support after 1934. During the Second World War, the Rockefeller Foundation abandoned the idea of science as an area detached from politics by definition. In the late 1940s, it carefully reassessed the German academic landscape and, in the case of the Kiel Institute, came to the conclusion not to resume a significant amount of support. [ABSTRACT FROM AUTHOR]

Against the background of the current discussion of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that minimum wages in Germany will be associated with significant employment losses among marginal and low- and semi-skilled full-time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased unemployment benefits and decreased revenues from corporate taxes. [ABSTRACT FROM AUTHOR]

This paper deals with the modern theory of social cost–benefit analysis in a dynamic economy. The theory emphasizes the role of a comprehensive, forward-looking, dynamic welfare index within the period of the project rather than that of a project's long-term consequences. However, what constitutes such a welfare index remains controversial in the recent literature. In this paper, we attempt to shed light on the issue by deriving three equivalent cost–benefit rules for evaluating a small project. In particular, we show that the direct change in a net national product (NNP) qualifies as a convenient welfare index without involving any other induced side effects. The project evaluation criterion thus becomes the present discounted value of the direct changes in NNP over the project period. We also illustrate the application of this theory in a few stylized examples. [ABSTRACT FROM AUTHOR]

The recent discussion about the revision of German merger control underlines the relevance of media economic questions. This discussion frequently neglects the particularities of media markets, for example the mutual interconnection of advertising and media markets, i.e. of "two-sided markets". In this paper the impact of "two-sided markets" on mergers is analyzed. The results indicate that an intensive analysis of each case because of the heterogeneity of each market and a stronger economization of merger control would be useful. The basis for an economization could be quantitative analyses that are conducted using existing market data. The print media market is an example of the peculiarities of "two-sided markets" at which network externalities lead to pricing behavior that deviates from that on normal markets. [ABSTRACT FROM AUTHOR]

This paper evaluates the role of preference shocks during the Great Depression in Germany. From Euler equation residuals, I am able to identify a series of contractionary shocks that struck the German economy from 1929 to 1932. I apply the sequence of these taste innovations to a dynamic general-equilibrium model and find that the size and the order of shocks can generate a pattern that can explain the lion's share of the decline in economic activity. The artificial economy also predicts a swift recovery after 1932, thereby questioning any significant effects of Nazi economic policy. [ABSTRACT FROM AUTHOR]

Based on data from the German Socio-Economic Panel (GSOEP), this paper analyzes the dynamics of equivalent income in East and West Germany in the years following reunification. Special emphasis is given to the separation of permanent and transitory components, the persistence of transitory shocks and their implications for the persistence of poverty and inequality. The results suggest that in West Germany, between 52 and 69 per cent of cross-sectional income inequality was permanent, and that poor individuals stayed in poverty for two years on average. In East Germany, the share of the permanent component in overall income inequality rose continuously from 20 per cent in 1990 to 72 per cent in 1998, reaching a level near the one that prevailed in West Germany during the same period. The rising importance of time-invariant components in East German incomes was also reflected in expected poverty durations which slightly increased from 1.47 years in 1990 to 1.67 years in 1998. [ABSTRACT FROM AUTHOR]

Stylized facts suggest that output volatility in OECD countries has declined in recent years. The causes and the nature of this decline have so far been analyzed mainly for the United States. In this paper, we analyze whether structural changes in output volatility in Germany can be detected. We report evidence that output volatility has declined in Germany. It is difficult to answer the question whether this decline in output volatility reflects good economic and monetary policy or merely‘good luck’. [ABSTRACT FROM AUTHOR]

This paper examines the seasonal structure of German real GNP per capita by using a version of Robinson's (1994) tests which is suitable in the context of seasonality. This method has several advantages over alternative approaches when testing for seasonal unit roots. First, unlike standard tests, which are nested in AR alternatives, it is embedded in fractional alternatives. Second, it allows testing at the zero frequency and at each of the seasonal frequencies separately. Third, it makes it possible to test for different orders of integration at each of the frequencies simultaneously. The empirical analysis suggests that the real output series may have a unit root at the zero frequency, and fractional rather than unit roots at the seasonal ones. This is in contrast to the findings reported by Lutkepohl et al. (1999) in their study on German money demand, and shows the importance of modelling the seasonal features of the data in alternative ways. [ABSTRACT FROM AUTHOR]

As an important fuel, hard coal shaped industrialisation. Due to its specific materiality, coal established different options for intertwining industry and resource. This paper concentrates on the one hand on the specific properties of coal and, on the other, on the economic and technological operations with coal. Using the example of the different material properties of coal from the coal districts of Inde and Wurm, these interrelations are examined and illustrate how a space of resource extraction could be arranged. [ABSTRACT FROM AUTHOR]

The First World War was not only a military conflict but also an economic war. In all belligerent countries, labour and resources were shifted from civil production to military production. Factory workers, miners and farmers produced a steady flow of supplies for the frontlines. Financial mobilization provided the money for arms, ammunition, and other supplies. In contemporary understanding 'financial mobilization' comprised all fiscal and monetary instruments that were necessary to finance the war. The aim of this paper is to discuss the interaction between the government and the central bank in Germany in financing the First World War. Aspects include the pre-war plans for financial mobilization, the fiscal and monetary policies of the war years and their inflationary consequences, the financing of foreign trade and financial demobilization during the transition from war to peace. [ABSTRACT FROM AUTHOR]

This paper provides novel evidence on the time varying impact of government spending shocks on output in Germany over the years 1970 to 2013. In a first step, I use an expectations-augmented vector autoregressive model with time varying parameters (TVP-VAR) to show that fiscal multipliers are not stable over time but exhibit a ushaped pattern. While multipliers fluctuate around 2 at the beginning and end of the sample, they are much smaller in between. In a second step, I discuss which factors determine the magnitude of German multipliers and hence explain the observed variation. It turns out that fiscal policy is more effective when business uncertainty is high but less in periods of financial market stress, while the state of the business cycle is of minor importance. Moreover, I find that fiscal sustainability is a crucial determinant of the multipliers. I conclude that policy recommendations based on average multipliers are misleading. [ABSTRACT FROM AUTHOR]

There is an intensive debate about old-age poverty in Germany that has induced political parties to develop proposals for higher pensions of poor pensioners in light of the federal elections of September 2013. In addition, several proposals from economists aim at reforming the pension system in a way that mitigates old-age poverty. In this paper, we consider these proposals in a computable general equilibrium model in order to derive their effects on the income distribution, on employment, on the capital stock and on GDP. Our results indicate that negative employment, capital and GDP effects are induced by such reforms as compared to the alternative of basic means-tested social welfare in old-age. Moreover, the strongest beneficiaries would be the currently higher age employees with low income and much less the respective younger employees, while younger and higher age employees with high and medium incomes will lose. [ABSTRACT FROM AUTHOR]

Copyright of Jahrbuch für Wirtschaftsgeschichte is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

In this paper, we empirically derive the welfare function that guarantees that the current German tax and transfer system for single women is optimal. In particular, we compare the welfare function conditional on the presence and age of children and assess how recent reforms of in-kind childcare transfers affect the welfare function. Our analysis is based on a discrete model of optimal taxation. We apply this framework using microsimulation and microeconometric techniques. In general, we find that marginal welfare weights are relatively high for non-working single women. Further, we show that the reform of in-kind childcare transfers is only optimal if society increases the marginal welfare weights for the working single women. [ABSTRACT FROM AUTHOR]

The volume of short-term liquidity credit (“Kassenkredit”) of the German municipalities has increased rapidly in the last two decades. This development suggests that this debt instrument has been diverted from its original purpose, namely as an instrument of bridging short-run liquidity shortfalls. In this paper we analyze the reasons for this development – from a legal and institutional perspective on the one hand, and from an economic perspective on the other hand. One key result of the analysis is that this development is partly due to the lacking intervention of municipal supervision institutions from the Länder (German Federal States). Obviously, the Länder tolerate the abuse of the Kassenkredit in order to avoid more open types of debt. In addition, we investigate how the introduction of the doubly-entry bookkeeping in the municipalities affects the (improper) use of short-term liquidity credits. Finally, we point to the potential of the municipal Kassenkredit as a loophole in the new German constitutional debt brake. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift fur Wirtschaftspolitik is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Which factors caused the growing international competitiveness of German mechanical engineering industry in the pre-World War I period? In this paper, we want to address this question and elucidate whether or not the international market success of machine builders in the German Empire was determined by technological creativity and the availability of a comparatively cheap labour force. Based on an unbalanced panel, we therefore investigate the influence of demand, labour costs and technological creativity on export performance of 32 different machinery types. We find robust evidence that the development of export–import ratios in mechanical engineering was positively influenced by the growth of patent stocks that represent the new knowledge being available for German machine builders. In addition, we present some evidence for the assumption that the growing international competitiveness of German mechanical engineering was also caused by decreasing relative unit labour cost. [ABSTRACT FROM AUTHOR]

Experimental studies of expectation formation of subjects are predominantly limited to the prediction of one single time series despite the practical relevance of expectations in situations with multiple sources of information. In this paper, we report on an experiment in which subjects are given time series (indicators) as additional information for the judgemental forecast of a stationary time series. The quality and the number of these indicators are varied in three versions of a forecasting experiment. We explore the effects on forecasting accuracy and we test the average forecasts of the subjects for consistency with the rational expectations hypothesis. A simple heuristic is presented that explains the average forecasting behavior better than the rational expectations if indicators are presented to the subjects. It is demonstrated by a simulation study that this result is representative for the considered stationary stochastic processes. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Soziologie is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper analyses the publication activities of German and Austrian research Institutes in the time period 1989–2000. We find that publication activities in these institutes have increased over time, but that only 49 (of 518) articles were published in “Top 30” Journals. There are also two distinct groups of institutes concerning publication activities. Furthermore, findings indicate that Austrian institutes contributed substantially to publications and show high productivity, but they could not keep up with the increase in the last years. [ABSTRACT FROM AUTHOR]

In this paper exact criteria are defined in order to identify a “fair” remuneration of the labour power. Due to this principle a point of reference is provided which makes it possible to refer to a “just” level of wages. Thus we are entitled to judge the factual pay as “too high” or “too low”. Finally an assessment of empirical evidence concerning the factor shares in Germany is given. [ABSTRACT FROM AUTHOR]

This paper summarizes the main results of a survey, which we conducted in May 2000 among German-speaking economists about their views on economics publications. Our results indicate that the world market for economics publications is not fully integrated across countries, but it appears to be at least partially segmented. Economics journals published in German-speaking countries appear to be relatively important for the work of German-speaking economists even though other journals have a better reputation among them. And although internationally reputed journals enjoy the highest reputation among German-speaking economists, domestic economic journals enjoy a higher reputation than would be justified according to international citation-based rankings. Especially older German-speaking economists tend to attach relatively high importance and reputation to domestic journals, while younger economists tend to favour international journals that focus on certain subfields of economics. [ABSTRACT FROM AUTHOR]

This paper attacks the widespread view that the latest (corporate) income tax reform in Germany was urgently needed to reduce the tax burden on the German economy. In the run-up to this tax reform, the public debate focused on nominal income tax rates and hence neglected the determination of the tax base. Empirical results on effective tax burdens in OECD countries show that a reform of German (corporate) capital taxation cannot be justified on the grounds of the tax burden. The international comparison of effective average tax rates shows that the corporate tax burden in Germany steadily declined from 1980 and was in 1996 lower than in most other industrialised countries. However, we argue that not only the actual tax burden but also the complexity of a tax system determines its international competitiveness. A German tax reform was – and still is – necessary due to the lasting complexity of the tax system and the relatively high tax burden on labour. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Sozialreform is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article offers information on the congress „The Marketization of Society: Economizing the Non-Economic," held June 1-2, 2012 at the Universität Bremen, Germany. Various papers are discussed including „Understanding the „Economization" of Social Formations" by Bob Jessop, „Marketization: Theoretical Reflections Building on the Perspectives of Polanyi and Habermas" by Alexander Ebner, and „The Economy, the Market and Exchange: Notes on Non-Identities" by Andreas Langenohl.

The article presents the 2008 journal-ranking for the economics profession, authored by the Committee for Research Monitoring (CRM) of the German Economic Association (GEA), the leading association of economists in Germany. The CRM will use 2008 journal-ranking for its evaluations in the future. To provide a more complete coverage, the CRM has resolved to record journal publications in the future directly from the publication lists of individual economists. It is hoped that this classification will provide some guidance for the economics profession at large.

Studies of structural change induced by environmental taxation usually proceed in a perfect-competition framework and typically find structural change to be quite moderate under realistic emission reduction scenarios. By observing that some of the industries affected are likely to operate under imperfect rather than perfect competition, additional mechanisms emerge which may amplify structural change beyond the extent identified as yet. Especially, changes in economies of scale may arise which weaken or strengthen the competitive position of industries over and above the initial cost effect. Using a computable general equilibrium model for Germany to examine the effects of a unilaterally introduced carbon tax, we find that induced structural change is more pronounced under imperfect competition than under perfect competition. At the macroeconomic level, we find that aggregate losses in economies of scale are larger than aggregate gains, implying that the total costs of environmental regulation are higher under imperfect competition than under perfect competition. [ABSTRACT FROM AUTHOR]

The German Child Benefit ('Kindergeld') is paid to legal guardians of children as a cash benefit. The benefit does not depend on household income or other household characteristics. I use exogenous variations in the amount of child benefit received by households in the German Socio-Economic Panel to estimate the impact of a given change in the child benefit on food expenditures of households, the probability of owning a home, rent per square meter, measures of the size of the home, as well as parents' smoking behavior and parents' alcohol consumption. Households primarily increase per capita food expenditures in response to increases in child benefit, and they also improve housing conditions. The effect of child benefit on per capita food expenditures is larger for low-income households compared to high-income households. I do not find a significant effect of child benefit on parents' smoking or drinking. [ABSTRACT FROM AUTHOR]

This study uses prices for the German 3 percent imperial loan issued in several tranches since 1890 and still traded during World War I to measure capital market players' real-time perceptions of the prospects for Germany as the war proceeded. Price data are gathered from the Amsterdam market for government bonds; the Netherlands remained neutral throughout war. Focusing on the window from August 24th 1915 to August 11th 1919, ten (twelve) turning points are identified in a baseline (extended) model. Each implies a significant adjustment of lenders' confidence in Germany being able, or willing, to service its debts in the future. Two turning points stand out. In early January 1916, the price plummeted by 14.3 percent between the first and eleventh of the month, which was most likely due to the Military Service Act discussed in the British parliament. On September 19th 1918, the price dropped by 17.5 percent compared to the last available price quote from the end of July. This coincides with the Allied Powers' revival on all fronts since the summer, leading to the ultimate collapse of the German lines. [ABSTRACT FROM AUTHOR]

In the following, we present the earliest input-output table for Germany: It covers 40 economic branches, five final demand categories and five primary inputs. The symmetric table for 1936 is completely based on original statistical data and does not rely on separate supply and use tables. The core of our endeavour is based on the German industrial census of 1936. Originally, this census and its forerunner of 1933 had especially been designed by the German Statistical Office (StRA) to compile an input-output-table for Germany as a basis for managing the business cycle. In connection with rearmament, however, this endeavour was given up and instead, these data were used for constructing detailed material balance sheets, which served as a statistical basis for preparing the war. Based on these hitherto secret records and additional statistical information, we fulfilled the original plan of the StRA of constructing the desired input-output table. Government is treated as an intermediate sector and placed into quadrant I of the table. In quadrant II it appears with only one figure (government gross production minus fees for specific government services). Government is delimitated into three sub-sectors: public administration and other government services, military spending and social security. In addition, public investment for civilian purposes is assigned to gross fixed capital formation in quadrant II. Military expenditure, however, is treated as government consumption and not as investment. The input-output table offers a new benchmark for gross domestic product (GDP) and thus production, income and expenditure of Germany in 1936. We found a comparably high level of GDP and a significantly higher mixed income/operating surplus which hints at exceptionally high incomes and hidden profits of the armament industry. Due to our unique production approach of calculating GDP these hidden profits were revealed. [ABSTRACT FROM AUTHOR]

The positions of British and German economists on public debt in the long nineteenth century differed substantially from each other. Whereas British classical economists regarded any public debt as ruinous for the country, German economists promoted debt accumulation for productivity-enhancing public investment and current outlays with benefits for future fiscal years. This article summarizes the positions of the most prominent British economists before 1850, David Hume, Adam Smith, David Ricardo, Thomas R. Malthus and John Stuart Mill, and deals more extensively with those of their German colleagues Carl Dietzel, Lorenz von Stein and Adolph Wagner after 1855. [ABSTRACT FROM AUTHOR]

The German population's material standard of living during the 'peace year' of the Nazi regime (1933-38) is much debated. We use hitherto disregarded consumption data and the axiom of revealed preferences to test whether the material standard of living improved. We find that the food consumption bundle realized in 1935-36 must have been inferior to that of 1927-28, despite GDP per capita being much higher. Even in 1937-38 consumers were probably worse off compared to 1927-28. We conclude that increasing consumption constraints forced German consumers to diet and thus to a material standard of living that was much more frugal than national income figures suggest. [ABSTRACT FROM AUTHOR]

The article explores the extent to which German entrepreneurship is opposed to an all-inclusive coverage of the unemployed, the reasons given for this opposition, and the impact on the job market. Claims of the contrary based on the book “Varieties of Capitalism,” are analyzed as well as general employer attitudes. Other aspects are discussed, including political economy, unemployment support, and employer interests. A list of relevant literature and sources, is included.

The article analyzes the law on executive directors' compensation in Germany. It provides an overview of the law, introduces economic theories concerning shareholder and agent relationships, and discusses the justification of the regulations, using D & O Insurance as an example. Economic consequences on the level of compensation are also addressed.

The article discusses the concept of social capital and its genesis and effects. The article analyzes components of both structural and cultural nature, and investigates social capital in Germany. Findings show that aside from personal factors, cultural, economic, and social aspects are to be considered. Further the impact of such aspects on the economy and overall quality of life are examined.

This article reviews the discretionary fiscal policy in Germany during the economic crisis of 2008/2009. After discussing the arguments for and against a fiscal stabilization program, I discuss several features a reasonable program should have. Applying those criteria to the German fiscal package, I find that while it satisfies most of them, it has two major flaws. First, the fiscal stimulus is likely to come too late, and second, the political marketing of the policy was disastrous. As a consequence the policy is likely to stabilize the economy in the second half of 2009 and in 2010, but did little to soften the initial blow of the recession. [ABSTRACT FROM AUTHOR]

We examine the research productivity of German academic economists over their life cycles. It turns out that the career patterns of research productivity as measured by journal publications are characterized by marked cohort effects. Moreover, the life cycles of younger German economists are hump shaped and resemble the life cycles identified for US economists, whereas the life cycles of older German economists are much flatter. Finally, we find that not only productivity, but also research quality follows distinct life cycles. Our study employs econometric techniques that are likely to produce estimates that are more trustworthy than previous estimates. [ABSTRACT FROM AUTHOR]

In one-shot investment games where each player's payoff is a convex combination of own and other's profit, we measure trust by the amount given to the trustee and trustworthiness by the amount returned to the trustor by the trustee. Does the degree of payoff interdependence increase both trust and trustworthiness or one but not the other or neither of them? According to our experimental data, trust remains unaffected by the extent of interdependence whereas trustworthiness reacts positively to it. [ABSTRACT FROM AUTHOR]

This article analyses public debt differences across industrial countries with a special focus on Germany on the basis of political economy approaches. We are interested in identifying the empirically relevant theories in order to draw conclusions for Germany based on international differences in the preferences of the political agents and/or in the political or budgetary institutions. We discuss the recent developments in Germany – notably the reform of the distribution of competencies between the federal and the state level – and conclude that the current situation provides some opportunities to address the issue of public debt. [ABSTRACT FROM AUTHOR]

In this article we examine whether or not the small size (in terms of population) of some German Laender (states) is harmful. The economic theory of federalism forms the ground on which we present empirical evidence, focusing on our own results for the German Laender. We find evidence that political decisions on federal level instead of Laender level cause preference costs, and so do decisions in big or merged Laender. On the other hand, economies of scale as an assumed advantage of big jurisdictions obviously do not influence the economic outcome very much. We do not find indications for strategic behaviour due to external effects either. Nonetheless, if external effects are regarded as a problem concerning "Stadtstaaten", they should rather be internalised by horizontal negotiations than by other instruments such as vertical payments or mergers between Laender. Hence, mergers of Laender do not seem to be a necessary precondition for decentralisation, which in turn is advisable as our results show. [ABSTRACT FROM AUTHOR]

This article analyses the impact of EU structural policy on the economic development of German regions between 1995 and 2004. In this period East-German regions have converged, while regional disparities have been increasing in West-Germany. In addition East-German have caught up with poor western regions. However the overall gap between rich and poor has risen. Economic theory describes a trade-off between regional convergence and aggregate growth. Our empirical findings support this hypothesis. It is shown that the EU's regional transfers speed up convergence, but have a negative impact on long-run aggregate growth. [ABSTRACT FROM AUTHOR]

Using a panel of west German states ( ) for the period 1985 to 2002 we analyse potential effects of demographic change and political constellations on higher education spending, as suggested by recent literature on the political economy of the determination of public expenditures. We find empirical evidence for the hypothesis of a negative relationship between demographic aging and higher spending on public education. In contrast to the hypothesis of the classical partisan theory that implies higher public expenditures under leftist parties, we find that governments under conservative parties or a coalition between social democrats and conservatives spend more on public higher education than governments run by the social-democratic party alone. [ABSTRACT FROM AUTHOR]

Economics and historical analysis have much to learn from each other, a fact more and more neglected in research and theory building, and especially in university instruction in German-speaking countries. The lecture tries to illustrate this by demonstrating that certain economic relationships like Gresham's law asserting that bad money drives out good with fixed exchange rates have been valid at least since Aristophanes. Similarly, it is also shown that the substitution of bad by good money(Thiers’ law) and that similar magnitudes of overshooting of exchange rates, given flexible rates, during high inflation, have been present for at least four centuries. These results refute the hypothesis asserted by some well-known historians that there can be no economic laws valid in different and distant periods of history. And second, the evidence proves the usefulness of putting the hypotheses of economics to the test of history. For instance the observation that the maximal overshooting of flexible currencies showing moderate inflations has been about 30% since the seventeenth century casts doubt on modern theories asserting that such deviations are a consequence of the huge increase of capital movements in recent decades. Moreover, many open questions in economics can only be answered by looking at events which occurred in earlier historical periods. One such question is at which rates of inflation Thiers's law begins to operate, since it obviously does not work at moderate rates of inflation. [ABSTRACT FROM AUTHOR]

In knowledge-based economies the effective use of new knowledge is the most important determinant of economic growth, and the capacity to generate and diffuse innovation forms the basis of comparative advantages. Transaction costs are the main reason why new knowledge takes so much time to spread around. Since clusters attract new ideas more easily, transaction costs may also cause regional divergence. European diffusion policies should therefore aim to minimize transaction costs for exchanging knowledge. It is proposed that this could be done by supporting extra-legal contractual relations guaranteed by third parties and by building up a rating system for trustworthiness of transaction partners. [ABSTRACT FROM AUTHOR]