Nach der Wahl: Was sind die wichtigsten wirtschaftspolitischen Herausforderungen?

Even though Germany’s economy is currently going strong, the country still faces enormous challenges if it wants to maintain and increase this prosperity. The new government should take this opportunity to set the course for the future by encouraging the digitalisation of the economy and the society as well as by ensuring that the ongoing energy transition is sustainable and efficient. Other challenges include the adverse effects of globalisation on parts of society and the uneven distribution of income and wealth. But the actual magnitude of the government’s room to manoeuver is up for debate. The new government’s fiscal space might be more limited than it seems, since an automatic adjustment of the income tax to inflation and growth is required to end the bracket creep. Given that transfer programmes are being phased out, the federal income tax surcharge to finance German unification also needs to be abolished. Further budget pressure stems from the pension system and from demands by state and local as well as European governments. The new German government should use the next governing period to initiate fundamental reforms of economic and fiscal policy that will provide adequate answers to long-run challenges.     

Wettbewerbsregeln für das digitale Zeitalter

A key aim of the ninth revision of the German Act against Restraints of Competition (GWB), intended to come into effect at the end of 2016, has been to address the current economic development induced by digitisation. Digitisation has the potential to become one of the most challenging developments for both competition policy and economic policy. This article evaluates the adequacy of the revision based on an economic analysis of the evolving market structures. These include two-sided markets and network effects, which require revision of the criteria for the evaluation of competition in markets. In addition, this article discusses the effects of the sharing economy on existing market structures, and the necessity to establish an appropriate regulatory framework and to eliminate possible market failures.     

Hat Deutschland ein Marktmachtproblem?

The long-term development of market power and business concentration is attracting considerable international attention. This is being driven by an intersectoral increase in market power — particularly in the USA but also in other countries — as observed in current empirical research. This is seen as a cause for macroeconomic developments. The Monopolies Commission — which has the mandate in Germany to report on business concentration — concluded in its current report that although the concentration of turnover in Germany has recently been relatively constant, the price-cost markups of companies have risen significantly after the crisis. In addition, indirect corporate links via institutional investors represent a potential competition problem.     

Gefährden institutionelle Anleger den Wettbewerb?

The Monopolies Commission, which advises the German government in competition policy making, warns against potential anti competitive effects of indirect horizontal links between competitors via institutional investors. Through such common ownership, the competitive conduct between suppliers could be alleviated, because their (joint) institutional shareholders interest in the overall market return may outweigh their interest in the individual firms’ returns. Taking account of the ubiquity of such common ownership in European and global markets as well as a non consideration in current competition law, the Monopolies Commission’s call for more research and vigilance appears to be appropriate.     

Capacity constrained firms in (labor) markets with adverse selection

Summary. We discuss a competitive (labor) market where firms face capacity constraints and individuals differ according to their productivity. Firms offer two-dimensional contracts like wage and task level. Then workers choose firms and contracts. Workers might be rationed if the number of applicants exceeds the capacity of the firm. We show that under reasonable assumptions on the distribution of capacity an equilibrium in pure strategies (by the firms) exists. This result stands in contrast to the case of unlimited capacity. The utility level is uniquely determined in equilibrium. No rationing occurs in equilibrium, but it does off the equilibrium path. Received: December 29, 1999; revised version: November 30, 2000     

Procurement under public scrutiny: auctions versus negotiations

We compare two commonly used mechanisms in public procurement: auctions and negotiations. The execution of the procurement mechanism is delegated to an agent of the buyer. The agent has private information about the buyer's preferences and may collude with one of the sellers. We provide a general characterization of both mechanisms based on public scrutiny requirements and show—contrary to conventional wisdom—that an intransparent negotiation always yields higher social surplus than a transparent auction. Moreover, there exists a lower bound on the number of sellers such that the negotiation also generates a higher buyer surplus.     

Where is the value added of rebalancing? A systematic comparison of alternative rebalancing strategies

This study compares the performance of different rebalancing strategies under realistic market conditions by reporting statistical significance levels. Our analysis is based on historical data from the United States, the United Kingdom, and Germany and comprises three different classes of rebalancing (periodic, threshold, and range rebalancing). Despite cross-country differences, our history-based simulation results show that all rebalancing strategies outperform a buy-and-hold strategy in terms of Sharpe ratios, Sortino ratios, and Omega measures. The differences in risk-adjusted performance are not only statistically significant, but also economically relevant. However, the choice of a particular rebalancing strategy is of only minor economic importance.     

Investment coordination in network industries: the case of electricity grid and electricity generation

Liberalization of network industries frequently separates the network from the other parts of the industry. This is important in particular for the electricity industry where private firms invest into generation facilities, while network investments usually are controlled by regulators. We discuss two regulatory regimes. First, the regulator can only decide on the network extension. Second, she can additionally use a “capacity market” with payments contingent on private generation investment. For the first case, we find that even absent asymmetric information, a lack of regulatory commitment can cause inefficiently high or inefficiently low investments. For the second case, we develop a standard handicap auction which implements the first best under asymmetric information if there are no shadow costs of public funds. With shadow costs, no simple mechanism can implement the second best outcome.     

Aufsicht der deutschen Flughäfen nicht dem Eigentümer überlassen

In Germany federal states are frequently both owners and regulators of commercial airports. This article argues that in order to avoid potential conflicts of interest, the supervision over fees should be handed over to an independent central agency. In addition, the liberalisation of the market for ground handling services should be continued. At large airports with sufficient capacity, additional independent service providers should be licensed to provide services.