The German and Dutch Economies

The German and Dutch Economies

Contributions to Economics Gerhard Gehrig/Wladyslaw Welfe (Eds.) Economies in Transition 1993. ISBN 3-7908-0721-4 Christoph M. Schneider Research and Development Management: From the Soviet Union to Russia 1994. ISBN 3-7908-0757-5 Bernhard BtihmlLionello F. Punzo (Eds.) Economic Performance 1994. ISBN 3-7908-0811-3 Lars Olof PerssonlUlf Wiberg Microregional Fragmentation 1995. ISBN 3-7908-0855-5 Ernesto FellilFurio C. Rosati! Giovanni Tria (Eds.) The Service Sector: Productivity and Growth 1995. ISBN 3-7908-0875-X Giuseppe Munda Multicriteria Evaluation in Fuzzy Environment 1995. ISBN 3-7908-0892-X Boris Maurer R&D, Innovation and Industrial Structure 1996. ISBN 3-7908-0900-4 Giovanni Galizzil Luciano Venturini (Eds.) Economics of Innovation: The Case of Food Industry 1996. ISBN 3-7908-0911-X David T. Johnson Poverty, Inequality and Social Welfare in Australia 1996. ISBN 3-7908-0942-X Rongxing Guo Border-Regional Economics 1996. ISBN 3-7908-0943-8 Oliver Fratzscher The Political Economy of Trade Integration 1996. ISBN 3-7908-0945-4 Ulrich Landwehr Industrial Mobility and Public Policy 1996. ISBN 3-7908-0949-7 Arnold PicotlEkkehard Schlicht (Eds.) Firms, Markets, and Contracts 1996. Corr. 2nd printing 1997. ISBN 3-7908-0947-0 Karin Peschel (Ed.) Regional Growth and Regional Policy Within the Framework of European Integration 1997. ISBN 3-7908-0957-8 Thorsten Wichmann Agricultural Technical Progress and the Development of a Dual Economy 1997. ISBN 3-7908-0960-8 Ulrich Woitek Business Cycles 1997. ISBN 3-7908-0997-7 Michael Carlberg International Economic Growth 1997. ISBN 3-7908-0995-0 Massimo Filippini Elements of the Swiss Market for Electricity 1997. ISBN 3-7908-0996-9 Giuseppe Gaburro (Ed.) Ethics and Economics 1997. ISBN 3-7908-0986-1 Frank HosterlHeinz Welsch! Christoph Btihringer CO 2 Abatement and Economic Structural Change in the European Internal Market 1997. ISBN 3-7908-1020-7 Christian M. Hafner Nonlinear TIme Series Analysis with Applications to Foreign Exchange Rate Volatility 1997. ISBN 3-7908-1041-X Sardar M.N. Islam Mathematical Economics of Multi-Level Optimisation 1998. ISBN 3-7908-1050-9 Sven-Morten Mentzel Real Exchange Rate Movements 1998. ISBN 3-7908-1081-9

Lei Delsen. Eelke de Jong (Eds.) The German and Dutch Economies Who Follows Whom? With 15 Figures and 37 Tables Springer-Verlag Berlin Heidelberg GmbH

Series Editors Wemer A. Miiller Martina Bihn Editors Dr. Lei Delsen Praf. Dr. Eelke de J ong University of Nijmegen Department of Applied Economics P.O. Box 9108 NL-6S00 HK Nijmegen, The Netherlands ISBN 978-3-7908-1064-6 Cataloging-in-Publication Data applied for Die Deutsche Bibliothek - CIP-Einheitsaufnahme The Gennan and Dutch economies: who follows whom?; with 37 tables I Lei Delsen; Eelke de Jong (eds.). - Heidelberg: Physica-Verl., 1998 (Contributions to economics) ISBN 978-3-7908-1064-6 ISBN 978-3-642-59019-1 (ebook) DOI 10.1007/978-3-642-59019-1 This work is subject to copyright. AII rights are reserved, whether the whole or part of the material is concemed, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its curren! version, and permis sion for use must always be obtained from Springer-VerlagBerlinHeidelbergGmbH. Violations are liable for prosecution under the German Copyright Law. Springer-V erlag Berlin Heidelberg 1998 Origina1ly published by Pbysica-Verlag Heidelberg New York in 1998 The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Softcover Design: Erich Kirchner, Heidelberg SPIN 10648054 88/2202-5 4 3 2 I 0- Printed on acid-free paper

Preface and Acknowledgements In the fall of 1996 the Centre for German Studies of the University of Nijmegen celebrated its fifth anniversary. Main part of the lustral events was a conference on Friday October 25th which had as its theme: "Germany and the Netherlands: Who follows whom?". The conference was prepared and organised by the Centre for German Studies, the Department of Applied Economics, Nijmegen Institute for Academic Studies (NIVAS) and the Transferbureau of the University of Nijmegen. The conference's lingua franca was neither German nor Dutch, but 'Neu Deutsch' as the president of the German central bank, Hans Tietmeyer, dubbed the English language at the beginning of 1997. This book contains a selection of the contributions to the international conference. The included six papers are revised and extended for this publication and supplemented by an introductory chapter and a concluding chapter by the editors. The theme was chosen in spring 1996. An important reason for the organising committee to select this theme was that at that time the German newspapers and television almost daily described the Netherlands as the example (model) which the Federal Republic of Germany should follow. A risk of selecting such a topical issue is that after some months the attention for it may fade away. Fortunately (at least for the organising committee) this certainly is not the case for the theme addressed here. In October 1996 the topicality of it was increased by Helmut Kohl, the German Chancellor, who just a few days before the conference was held devoted an important part of his opening-speech of the 'CDU Parteitage' to the issue of Germany's competitiveness. He held up the Netherlands and Austria as examples of countries where the wages and other production costs are lower than in Germany. "Our competitors in Western Europe and North-America have understood the signs of the times already. Almost all industrial countries change their social systems; tax rates are worldwide an essential element for attracting foreign investments" (according to Kohl). Other German leaders also pointed at the Netherlands as an example. Klaus Escher, leader of the 'Junge Union', drew the attention to the problems in the Federal Republic of Germany with regard to the financing of pensions. He prefers a

VI Preface and Acknowledgements switch towards the Dutch system in which an essential part of the pensions is financed by means of a funding system. In our view at present (June 1997) the theme of this book still is very topical. At the summit of Amsterdam the leaders of the member states of the European Union devoted much time to the high level of unemployment in many European countries. They agreed on an employment chapter in the Treaty of Amsterdam and called for studies, which should compare the institutions in the member states with a view towards selecting the best practices for enhancing employment in Europe. In many respects this book perfectly fits into this strategy, for a comparison is made of the institutional structures and features of the German and Dutch welfare states. The focus is on labour market policy and performance, the effectiveness of the Dutch and German wage setting institutions, the monetary policy of the central banks and the competition policy. The United Kingdom and the United States of America are used as benchmark countries. We would like to seize this opportunity to thank some persons and institutions for their part in the organisation of the conference and the preparation of the manuscript for this book. First of all we would like to thank the contributors to this book for their willingness to write and translate (if necessary) their contribution. We thank Harry Garretsen for his comments on an earlier version of Chapters 1 and 8 and Bas van Aarle for providing Figures 1.2 and 1.3. Tine Verhey-van der Linden and her assistants are thanked for the organisation of the conference day and An Barten for her secretarial assistance. We also want to express a special gratitude to Jan van Megen, Director of the Centre for German Studies, for his support. Finally, financial support by the Centre for German Studies and the Rabobank is gratefully acknowledged. Lei Delsen and Eelke de Jong University of Nijmegen September 1997

Contents Preface and Acknowledgements List of Contributors v ix Part I Introduction 1 1 Good Neighbours: Germany and the Netherlands Lei Delsen and Eelke de Jong 3 Part II Institutional Differences in the Welfare States 37 2 Wage Bargaining, Labour Markets and Macroeconomic Performance in Germany and the Netherlands David Soskice, Bob Hancke, Gunnar Trumbull and Anne Wren 39 3 The Dutch Employment Miracle? A Comparison of Employment Systems in the Netherlands and Germany Gunther Schmid in collaboration with Maja Helmer 52 4 Benchmarking the German and Dutch Welfare States Arthur van de Meerendonk 86

viii Contents Part III Financial and Competition Policies 5 The Financial Structure in the Netherlands and Germany: Different, Harmonious, and on the Move? Lex Hoogduin and Henk Huisman 6 A Stable Partnership - German-Dutch Monetary Relations in the Run-up to EMU Reimut lochimsen 7 Comparing Dutch and German Competition Policies Raymond Gradus 125 127 137 146 Part IV Concluding Remarks 8 Germany and the Netherlands: Who Follows Whom? Lei Delsen and Eelke de long 157 159 List of Figures List of Tables Author Index Subject Index Centre for German Studies 177 179 181 183 189

List of Contributors Lei Delsen is Assistant Professor at the Department of Applied Economics of the University of Nijmegen, the Netherlands. His current research deals with a number of topical European labour market problems and issues, including new forms of work, retirement from work and employment policy. He published several books and articles. He is author of Atypical Employment: An International Perspective. Causes, Consequences and Policy (Groningen: Wolters Noordhoff, 1995) and co-editor with Genevieve Reday-Mulvey of Gradual Retirement in the OECD Countries. Macro And Micro Issues and Policies (Aldershot: Dartmouth, 1996). Raymond Gradus is currently working at the Dutch Ministry of Economic Affairs, The Hague, and is Associate Professor at the Research Centre for Economic Policy of the Erasmus University Rotterdam, the Netherlands. During the writing of his contribution he was working at the Ministry of Finance, The Hague. His main areas of research are growth theory and applications of microeconomics to policy problems. He published three books and about 40 articles in (inter)national journals and books. Recent publications include 'Pollution, Abatement and Long-term Growth', European Journal of Political Economy, 1996 (together with S. Smulders), and 'The economic effects of extending shop opening hours', Journal of Economics, 1996. Bob Hancke is Research Fellow in the Research Unit on Economic Change and Employment of the Wissenschaftszentrum Berlin fur Sozialforschung (Social Science Research Centre, Berlin; WZB), Germany. Maja Helmer was student of political science in Bonn, Berlin and Durham/N.C. She was Research Assistant in the Wissenschaftszentrum Berlin fur Sozialforschung (Social Science Research Center, Berlin; WZB) in late 1996 and is currently finishing her masters degree in political science at the Free University of Berlin, Germany.

x List of Contributors Lex Hoogduin is currently working as Advisor to the President of the European Monetary Institute, in Frankfurt, Germany and is a Professor of Money and Banking at the University of Groningen. Before 1 July 1997, he worked at the Dutch central bank in Amsterdam as head of the Monetary and Economic Policy Department, and, related to that, he was, among other things, an Alternate to the Dutch central bank member of the Monetary Committee of the European Union. Previously, he worked at the University of Groningen. His main area of research is monetary and financial economics. He published several books and articles, among which his thesis Some Aspects of Uncertainty and the Theory of a Monetary Economy (Groningen: University of Groningen, 1991). Henk Huisman is at the Monetary and Economic Policy Department of the Dutch central bank, Amsterdam, the Netherlands. His main research interests concern the structure of (international) financial markets, also in relation to the introduction of the euro. Previously, he worked for the International Monetary Fund, in Washington D.C., United States, the Ministry of Finance, in The Hague, and the Amsterdam Stock Exchange, the Netherlands. Reimut Jochimsen, Professor of Economics, is President of the Landeszentralbank in North Rhine-Westphalia, Dusseldorf, Germany, and Member of the Central Bank Council of the Deutsche Bundesbank. Main fields of research are monetary policy, the European Economic and Monetary Union, the financial market and regional science. He published since 1960 several books and articles in international publications. Recent publications include: 'Europaische Wirtschafts- und Wahrungsunion: Auf Biegen und Brechen?',Aussenwirtschajt, 1996; 'Regional Science in Germany - From the Beginning to the Present' in: K. Peschel (ed.), Regional Growth and Regional Policy within the Framework of European Integration (Heidelberg: Physica-Verlag, 1996); 'Revisionskonferenz 1996: Wirtschafts- und wahrungspolitische Anforderungen an ein Maastricht II' in: D. Grimm, J.J. Hesse, R. Jochimsen and F.W. Scharpf (eds.), Zur Neuordnung der Europiiische Union: Die Regierungskonferenz 1996/97 (Baden Baden: Nomos-Verlag, 1996). Eelke de Jong is Professor of International Economics at the Department of Applied Economics of the University of Nijmegen, the Netherlands. He is coordinator of the postdoctoral programme 'Doing business in Germany' of the Centre for German Studies of the University of Nijmegen. Previously he worked at the University of Groningen and the University of Amsterdam. In 1994 he was a Visiting Professor at CERGE, Charles University, Prague, Czech Republic. He published two books and several articles in international journals on international financial issues. Among them are: Exchange Rate Determination and Optimal Economic Policy under Alternative Exchange Rate Regimes (Berlin: Springer Verlag, 1991) and 'Expectations of Selling-Prices in the EMS' in: P. de Grauwe, S. Micossi and G. Tullio (eds.), Inflation and Wage Behaviour in the European Monetary System (Oxford: Oxford University Press, 1997).

List of Contributors xi Arthur van de Meerendonk is a Senior Economist at the Economic Policy Directorate General in the Dutch Ministry of Social Affairs and Employment, The Hague, the Netherlands. He has contributed to the report The Dutch Welfare State From an International and Economic Perspective (The Hague: Ministry of Social Affairs and Employment, 1996). Previously he has worked for the Dutch Ministry of Health Care, The Hague. Giinther Schmid is Director of the Research Unit on Labour Market Policy and Employment of the Wissenschaftszentrum Berlin fur Sozialforschung (Social Science Research Centre, Berlin; WZB), Germany. He is also Professor of Political Economics at the Free University of Berlin. His main research is on equity and efficiency in labour market policy. He is the main editor of International Handbook of Labour Market Policy and Evaluation (Cheltenham: Edward Elgar, 1996) and Labour Market Institutions in Europe (Armonk: M.E. Sharpe, 1994). David Soskice is Director of the Research Unit on Economic Change and Employment of the Wissenschaftszentrum Berlin fur Sozialforschung (Social Science Research Centre, Berlin; WZB), Germany. His main research is on the impact of education and training systems, financial systems and industrial relations systems on company human resource policies and product market innovation and competitiveness. He is Emeritus Fellow in Economics at University College, Oxford University, United Kingdom, where he taught from 1968 to 1990, and has been a Visiting Professor in the economics department at the University of California at Berkeley, in political science at Duke University, and in industrial relations at Cornell University, United States. Gunnar Trumbull is a doctoral candidate at the Massachusetts Institute of Technology (MIT), Cambridge, United States and a Visiting Researcher at the Wissenschaftszentrum Berlin fur Sozialforschung (Social Science Research Centre, Berlin; WZB), Germany. Anne Wren is a doctoral candidate at the Harvard University, Cambridge, United States and a Visiting Researcher at the Wissenschaftszentrum Berlin fur Sozialforschung (Social Science Research Centre, Berlin; WZB), Germany.