‘Children of the Wall’: Outcomes for kids born in a crisis
Arnaud Chevalier, Olivier Marie 08 November 2014
Children born in crises face different initial conditions. Data on children born in East Germany just after the Berlin Wall came down confirms that this corresponds to worse adult outcomes. ‘Children of the Wall’ have 40% higher arrest rates, are 33% more likely to have repeated a grade by age 12, and are 9% more likely to have been put into a lower educational track. This column argues that these negative outcomes can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.
This month, Germany and the rest of Europe celebrate the 25th anniversary of the fall of the Berlin Wall, perhaps the most symbolic moment of the collapse of the communist regimes in Eastern Europe. This event had colossal repercussions for the economic development of the region but also, and maybe less obviously, on its demography. Following the collapse of the Communist regimes, fertility in Eastern Europe went into a sharp decline (United Nations Economic Commission for Europe 2000).
Education Labour markets
uncertainty, Germany, parenting, education, crime, cohort effects, parental education, Berlin Wall
Lessons from the financial preparations in the lead-up to the first world war
Harold James 09 July 2014
The 1907 panic affected the world, demonstrating the fragility of the international financial system. This column discusses the steps the US and Germany took in fortifying their financial systems following 1907. There is a link between the financial crisis and the escalation of diplomatic relations that led to war in 1914. And this link has implications for today as the world is recovering from the 2008 crisis.
The 1907 panic emanated from the US but affected the rest of the world and demonstrated the fragility of the whole international financial order. The aftermath of the 1907 crash drove the then hegemonic power – Great Britain – to reflect on how it could use its financial power. There is a close link between the aftermath of a great financial crisis and the escalation of diplomatic tensions that led to war in 1914.
Germany, US, WWI, Great Britain
Trust-based working time spurs innovation
Holger Görg, Olivier N. Godart, Aoife Hanley, Christiane Krieger-Boden 08 July 2014
Many firms are replacing traditional working hours with more flexible arrangements, reflecting new thinking on employee motivation. This column presents evidence from Germany that trust-based working time is associated with increased innovation. However, trust-based working hours also contribute to the blurring of workers’ professional and private lives, and may lead to excessive overtime. Careful design of trust-based working arrangements is required to reap the innovations gains while avoiding the health pitfalls.
The organisation of work has changed dramatically over the last few decades. In particular, the formerly rigidly regulated working time has been replaced by flexible working hour schemes in numerous firms around the world. Taking Germany as an example, in 2010, 36% of employees were entitled to some form of flexible working hours scheme (Figure 1).
Health economics Labour markets Productivity and Innovation
Germany, working hours, trust, health, innovation, motivation, overtime, flexibility, working time
The euro crisis: Muddling through, or on the way to a more perfect euro union?
Joshua Aizenman 03 July 2014
After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.
The short history of the Eurozone has been remarkable and unprecedented – the euro project has moved from the planning board to a vibrant currency within less than ten years. Otmar Issing’s optimistic speech in 2006 reflects well the buoyant assessment of the first decade of the euro – an unprecedented formation of a new currency without a state.1 Observers viewed the rapid acceptance of the euro as a viable currency and the deeper financial integration of the Eurozone and the EU countries as stepping stones toward a stable and prosperous Europe.
Institutions and economics International finance Monetary policy
Germany, ECB, eurozone, inflation targeting, euro, institutions, Eurozone crisis, GIIPS
Why Europe needs two euros, not one
Jacques Melitz 02 July 2014
As the Eurozone cautiously implements stabilising reforms, Germany is forced to go further with concessions than it would prefer. This column suggests that it would be beneficial for discontented members to consider the formation of a second monetary union. The second euro can be constructed better than the first, bringing the discontented members exchange-rate adjustments relative to Germany, and avoiding competitive devaluations.
One basic feature of the sickly situation in the Eurozone today is that the system does not clearly bear any essential flaw from the standpoint of Germany. All things considered, the country has not done badly since the Great Recession of 2008-2010. And as the Eurozone moves forward gingerly with necessary reforms in order to avoid a break-up of the system, it is evident that Germany is constantly under pressure to go further with concessions than it would prefer.
EU institutions EU policies
Germany, eurozone, second common currency
Four myths about the Great War of 1914-1918
Mark Harrison 03 June 2014
The Great War offers lessons for today. But this column argues from recent research that many so-called lessons are misunderstood. Secretive, authoritarian regimes become dangerous when they fear the future. Deterrence matters. Other aspects also demand re-evaluation.
As its centennial approaches, the events of the Great War have worldwide resonance. Most obviously, is China the Germany of today? Will China’s rise, unlike Germany’s, remain peaceful? The journalist Gideon Rachman wrote last year (Financial Times, February 4, 2013):
“The analogy [of China today] with Germany before the first world war is striking … It is, at least, encouraging that the Chinese leadership has made an intense study of the rise of great powers over the ages – and is determined to avoid the mistakes of both Germany and Japan.”
Economic history Europe's nations and regions
Germany, WWI, Versailles treaty, reparations
The German surplus and the Eurosceptics
Francesco Daveri 28 May 2014
Eurosceptic parties have been popular in the recent European elections, many complaining that the euro has only served Germany's interests. This column points out that although data on aggregate trade flows show that Germany's trade surplus with the rest of the Eurozone is not excessive, the success of a Eurosceptic party is larger in countries where the bilateral trade deficit with Germany has increased in recent years. A gradual rebalancing of Germany's external accounts of Germany would bring with it not only a greater economic stability in the Eurozone but also greater political stability.
In the European elections of 25 May, the Eurosceptic parties achieved considerable electoral success.
Europe's nations and regions Politics and economics
Germany, Eurosceptics, trade surplus
Nazi pork and popularity: How Hitler’s roads won German hearts and minds
Hans-Joachim Voth, Nico Voigtländer 22 May 2014
The Hitler government built the world’s first nationwide motorway network. We examine the impact of road-building on the popularity of the Nazi regime. Using shifts in electoral support between 1933 and 1934, we conclude that ‘pork-barrel’ spending worked in reducing opposition to the regime – wherever the new roads ran, fewer Germans voted against the government in elections and plebiscites. At least part of the regime’s popularity after 1934 can be explained by the popularity of the Autobahn.
‘At least he built the Autobahn’. Many Germans remember this phrase from conversations with parents and grandparents pointing to how the Nazi regime could receive such widespread support. The regime’s overwhelming popularity at home was essential for its policies, from the aggressive pursuit of war abroad to genocide.
Economic history Politics and economics
Germany, Adolf Hitler, Nazis, autobahn, pork-barrel spending
A minimalist approach to fiscal oversight
George Kopits 24 December 2013
Germany’s newly established Advisory Council – tasked with monitoring compliance with the constitutionally mandated balanced budget rule – lacks the analytical capacity and independence of its counterparts in the UK, the US, and the Netherlands. It is perhaps by virtue of the current government’s record of fiscal responsibility that a more comprehensive watchdog is not urgently needed, but the newly formed coalition should not miss the opportunity to establish comprehensive fiscal and banking oversight.
The German government has received much criticism for its reluctance to support unified banking supervision under the European Central Bank and the European Commission. Whereas the case for leaving banking regulation and resolution to national authorities, linked by a loose supranational network, may have some merit (Mody 2013), Germany’s apparent preference for bypassing international standards of good practice in regulating its own banking institutions is difficult to justify.
Europe's nations and regions
Germany, banking regulation, fiscal regulation
German labour reforms: Unpopular success
Tom Krebs, Martin Scheffel 20 September 2013
Faced with stubbornly high and persistent unemployment in 2003-05 the German government implemented far-reaching labour-market reforms, the so-called Hartz reforms. This column shows that these reforms were highly successful in bringing down the non-cyclical component of unemployment in Germany but also argues that the Hartz reforms created winners and losers. This explains why these reforms have been hugely unpopular among the German public.
Just a few years ago, Germany was known as the sick man of Europe (Burda 2007). Starting from an average unemployment rate below 4% in the 1970s, Germany saw its rate increase to almost 9% in the period 1995-2005. As seen in Figure 1 the unemployment rate has a strong cyclical component but also a trend component that has been rising since the 1970s until the mid-2000s.
Figure 1. Quarterly unemployment rate, Germany 1970Q1-2012Q4
Labour markets Macroeconomic policy
Germany, unemployment, reforms