Hardly a week goes by without an announcement of a new, usually cross-border merger. Mergers offer not only new business opportunities but also raise questions of the reform of international competition rules. Prof. Dr. Wernhard Möschel, Chairman of the German Monopoly Commission and the Scientific Advisory Council of the Federal Ministry of Economics and Technology, rejects the idea of creating an international competition office and argues for the coexistence of various competition regimes. Ursula Konitzer, deputy chair of the German Employees Union (DAG), favours an international regulatory framework for effective merger controls. Prof. Dr. Henning Klodt , head of the department for Growth, Structural Change and the International Division of Labour at the Institute for the World Economy in Kiel, also sees the need for internationally binding competition rules that could be administered by the WTO for cross-border mergers.
By Hans-Werner Sinn and Martin Werding
The plans of the German government and the parliamentary opposition for a long-term reform of the social insurance system are taking on contours, and the parliamentary hearings on a new law to reform the social insurance system should be concluded by the end of the year. However, little attention has been given to the actual foundations of a pay-as-you-go social insurance system and the distribution effects that ensue from the demographic problems of financing the system. The main cause of the crisis facing the system is the decline in the birth rate which began in the mid-1960s. This decline has lowered the average costs for children assumed by each working generation and at the same time increases the burden of the children in their later working lives.
For this reasons the Ifo Institute proposes a reform concept whose main goal is a more equal distribution of the total burden from the social insurance system and the raising of children over all affected generations and also within each generation. To accomplish this a long-term stabilisation of the social insurance contribution rate and a stronger differentiation of individual social insurance benefits based on the number of children is required. A major consequences of the reform concept is the transition to a partially funded social insurance system. If the contribution rates remain stable and the number of children declines, reductions in benefits will be automatic. This can be compensated if the insured invest the money they have saved on raising children in capital markets and thus increase their retirement income.
The economic indicator released monthly by the EU reached its highest level since August 1989 in May. It is also a sign that the recovery in European industry will continue during the second half of 2000.
German exports expanded robustly during the first three months of the year. In March export growth was 21% above the previous-year level. The weak euro and growth dynamics in the Euro zone favoured this development. Economic indicators show that export expansion can also be expected during the second quarter of 2000.
The labour market successes in the Netherlands have been put forward as a model for other countries. From 1983 to 1998 the standardized unemployment rate sank from 9.7% to 4.0%. If, however, the expansion of part-time employment and the rising number of welfare recipients and early retirees is taken into account, the increase in employment is somewhat less impressive.
In Germany the burdens on the factor labour from taxes and social insurance contributions is very high at 68.1%. this means that more than two thirds of the additional value added that results from an intensified use of labour is taken by the state. Even after the government's planned tax reform, the burden on labour will still be higher than in most OECD countries. A detailed presentation of burdens in an international comparison and a juxtaposition of the tax reform proposal of the German government and those of the CDU/CSU will appear in the next ifo Schnelldienst.
The Database for Institutional Comparisons in Europe (DICE) is a new service offered by the Ifo Institute. It contains country comparisons of institutional variables, regulations and structures that are relevant for economic policy. As a rule, the 15 EU member states as well as Switzerland, the U.S. and Japan are included. The database is supplemented monthly. The initial focus has been place on public finances, the labour market and capital markets. Access to DICE is unrestricted.
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