Germany is in a dilemma. Low wage competition via product and factor markets increases the demands on the welfare state, but increased systems competition in the context of international factor mobility reduces the possibilities of maintaining it. The welfare state has important allocative...

The paper studies the role of international implications after EU enlargement. Based on a formal model with migration costs for both capital and labor, it predicts a two-sided migration from the new to the old EU countries which is later reversed. As the migration pattern chosen by market forces...