Adjustment costs cause movements of the labour share if the economy experiences demand or wage shocks. With linear adjustment costs and Cobb-Douglas technology, these movements are independent of the size of these shocks and depend only on the size of the adjustment costs.

A firm facing employment protection will defend its market position more fiercely than a firm operating without such restrictions. However, ex ante it will be more reluctant to expand its market position. For the benchmark case of contest competition, the defensive effect dominates. A firm...

We use a model of horizontal and vertical differentiation to study physicians’ incentives to provide quality in the physician-patient relationship under price regulation. If the price is the only regulatory variable, the social planner cannot implement the first-best policy. Moreover, the...

We analyze the deficits of the German Länder for the period from 1960 to 2005 and test a number of hypotheses derived from the literature on the political economy of public deficits. Estimating a dynamic panel data model, we find evidence for political opportunism in the spirit of Rogoff and...

In a model of spatial competition, we analyse the equilibrium outcomes in markets where the product price is exogenous. Using an extended version of the Hotelling model, we assume that firms choose their locations and the quality of the product they supply. We derive the optimal price set by a...

The German statutory health insurance market was exposed to competition in 1996. To avoid adverse selection, a prospective risk compensation scheme was introduced in 1994. Due to their low contribution rates, company-based sickness funds were able to attract a lot of new members. We analyze –...