Table Of ContentChallenging Neighbours
Rethinking German and
Dutch Economic Institutions
Springer
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Heidelberg
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CPB
Netherlands Bureau for Eeonomie Poliey Analysis
Challenging Neighbours
Rethinking German and
Duteh Eeonomie Institutions
With 40 Figures
and 104 Tables
, Springer
CPB Netherlands Bureau for Eeonomic Poliey Analysis
P.O. Box 80510
2508 GM The Hague
The Netherlands
ISBN -13:978-3-540-63501-7 e-ISBN-13:978-3-642-60900-8
DOI: 10.1007/978-3-642-60900-8
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Die Deutsche Bibliothek - CIP-Einheitsaufnahme
Challenging neighbours: rethinking German and Dutch economie institutions; with 104
tables I CPB, Netherlands Bureau for Economie Poliey Analysis. - Berlin; Heidelberg;
New York; Barcelona; Budapest, Hong Kong; London; Milan; Paris; Santa Clara; Singa
pore; Tokyo: Springer, 1997
ISBN -13:978-3-540-63501-7
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Preface
This book is an example of CPB-teamwork. It started in autumn 1993 on the
initiative of Gerrit Zalm, former director of CPB, currently minister of finance of
the Netherlands. The purpose of the project is to increase insights in the German
and Dutch economies' strengths and weaknesses, in particular regarding their
institutional orders. These insights, in turn, can provide policy options for policy
makers to enhance social innovation: the adjustment of institutions and practices
to changing circumstances. The study emphasizes that social innovation is a
process of trial and error in which policy-makers face various trade-offs. Hence
learning is of paramount importance. That also applies to CPB: the study took a
long time to mature, not least because it was an interesting and challenging
learning process for its authors. The project leader, George Gelauff, showed
considerable 'Ausdauer' in guiding and coaching achanging team through the
many ups and downs that came with the process.
In retrospect, three phases can be distinguished in the project. The first phase
may be called the exploratory phase. During this phase, almost all divisions of
CPB were asked to conduct a comparative analysis in their field. With respect to
the choice of focus, they had complete freedom. This phase took about one year
and was concludea with an internal workshop where the research output was
presented. Results of this phase were laid down in internal papers; some of these
were published as CPB-research memoranda (vocational education, agriculture,
trade interelationships) or in the annual Central Economic Plan (sectoral structure).
During the second phase, which started at the beginning of 1995, it was decided
to focus the study on a number of topics that were considered to be of special
interest for Dutch and German policy-makers. Selected topics were the socio
economic order, labour market and social protection, corporate governance and
finance of SMEs, R&D policies, and regulation and competition policies. During
this phase, lasted until May 1996, the analysis of these topics was deepened. At the
same time, work started on the development of an overall analytical framework for
the analysis of institutions. Staff members which were involved in this phase were
Corina den Broeder (labour market), Philip ten Cate (health care), Theon van Dijk
(from February 1996 on R&D policies), George Gelauff (analytical framework,
vi Preface
corporate governance and labour market), Larissa van Geijlswijk (electricity and
gas markets), Nicole de Jager (small business finance) and Helmer Vossers (from
June 1995 at the Dutch Ministry of Finance, on social protection and pensions).
Main research products of this period are research memoranda on corporate
governance and the labour market, again other results were laid down in internal
papers.
The final phase, the actual writing of the book, started in July 1996 and lasted
until early July 1997. For this task, the team was temporarily reinforced. The team
that wrote the book consisted of Eric Bartelsman (Chapter 14, Health Care), Lans
Bovenberg (Chapters 6 and 7, Social Protection and Pensions), Corina den Broeder
(Chapters 8, 9 and 10 on the Labour Market and Corporate Governance), Kick
Bruin of the Dutch Social and Economic Council (Chapter 12, Regulation and
Competition Policies), Theon van Dijk, now at National Economic Research
Associates (Chapter 11 and 12, R&D Policies and Regulation and Competition
Policies), George Gelauff (Chapters 1,2,5, 10 and 11, on Comparing German and
Dutch Institutions, the Interplay of Institutions, Socio-Economic Governance,
Corporate Governance and R&D policies, respectively), Larissa van Geijlswijk
(Chapter 13, Electricity and Gas Markets), Nicole de Jager, now at ING Group
(Chapters 3 and 4, Economic Development in Comparison and Structural
Comparison; the work on SME finance will be published separately), Andre de
Jong (Chapter 13 and 14, Electricity and Gas Markets, Health Care), Kees van
Paridon of the Scientific Council for Government Policy (WRR) (Chapters 3 and
4, Economic Development in Comparison and Structural Comparison). The general
direction of the writing of the book was in the hands of Lans Bovenberg, George
Gelauff en Andre de Jong.
Other staff members of CPB that provided support for the production of the book
were Ton Brouwer, Adri den Ouden, Maja Verhoeve and Erwin Zijleman
(construction of figures), Jacqueline de Haan-Vellinga and Kathy Schuitemaker
(secretarial assistance), Gerda Janssen, Lucienne Damshuizer en Aurelia
Meershoek-Horbowiec (librarians) and John Koenders and Chris Stoop
(reprography).
Finally, I would like to express my gratitude to the many institutions and persons -
see the list of acknowledgements -who have provided us with information or have
commented on preliminary drafts of chapters of the study. A special word of
thanks is due to the Social and Economic Council of the Netherlands and the
Dutch Scientific Council for Government Policy for their kind permission to lend
out staff members of their institutes to CPB.
F.J.H. Don
Director
Table of Contents
Preface v
1 Comparing German and Dutch lnstitutions 1
1.1 Motivation 1
1.2 Structure of the Study and Summary of Policy Options 10
2 The lnterplay of Institutions, Trade-offs, Performance and Trends 41
2.1 Foundations 42
2.2 Coordination Issues: Four Types of Market Failures 48
2.3 Four Coordination Mechanisms 53
2.4 Issues and Mechanisms Combined: Trade-offs 61
2.5 The Impact of Trends on Institutions 74
3 Economic Development in Comparison 79
3.1 Economic Development at the Macro Level 80
3.2 Labour Market Performance 89
3.3 The Public Sector 93
3.4 Foreign Trade 99
3.5 Monetary Policy 102
3.6 Distribution of Income and Consumption 104
3.7 Conclusion 107
4 A Structural Comparison 109
4.1 Geographical Conditions 109
4.2 Energy Resources and Energy Use 111
4.3 Demography 113
4.4 Capital Stock and Investment 121
4.5 Transport and Communication Infrastructure 130
4.6 Environment 133
4.7 Regional Patterns: Shifts in German Growth Centres 136
viii Table of Contents
4.8 Conclusions 137
5 Govemance of the Socio-economic Order: An Economic Perspective 139
5.l The Socio-economic Order 140
5.2 The Political System 155
5.3 Challenges for Reform 164
5.4 Policy Conclusions 170
6 Social Protection 175
6.l Theoretical Framework: Market Failures and Trade-offs 176
6.2 Social Security in Germany and the Netherlands in
the Mid Eighties 189
6.3 Reforms in the Netherlands 199
6.4 Trends 207
6.5 Policy Options for Reform: The Unfmished Agenda 214
7 Pensions 223
7.l Market Failures and Trade-Offs 223
7.2 Pensions in Germany and the Netherlands 236
7.3 Performance of the Pension Systems 245
7.4 Trends 250
7.5 Policy Options 255
8 Labour Market: Institutional Environment 265
8.l Analytical Framework 265
8.2 Employment Protection in Germany and the Netherlands 284
9 Labour Market: Institutional Arrangements 305
9.l Collective Bargaining in Germany and the Netherlands 305
9.2 Vocational Education in Germany and the Netherlands 319
9.3 Co-determination in Germany and the Netherlands 329
9.4 Policy Options 339
10 Corporate Govemance 345
10.1 Analytical Framework 346
10.2 Corporate Govemance in Germany and the Netherlands 356
10.3 Trends and Policy Options 373
11 Science and Technology Policy 383
11.1 Analytical Framework 384
11.2 The Institutions of German and Dutch Science Policy 400
11.3 Institutions of German and Dutch Technology Policy 420
11.4 Trends and Policy Options 425
Table of Contents ix
12 Regulation and Competition Policies 431
12.1 Theoretical Backgrounds 431
12.2 Sea Changes: The Impact of Trends 442
12.3 Regulation in Germany and the Netherlands:
The Current State of Flux 445
12.4 Competition Policy 452
12.5 Assessment and Policy Options 462
13 Electricity and Gas Markets 467
13.1 The Shift in Thinking on Natural Monopolies 468
13.2 German and Dutch Energy Market Institutions:
The Present Situation 473
13.3 Regulatory Reform 485
13.4 Conclusions and Policy Options 496
14 Health Care 503
14.1 Theoretical Framework: Market Failures and Trade-offs 505
14.2 Health Care Institutions in Germany and the Netherlands 516
14.3 Performance of Health Care Institutions 528
14.4 Trends 535
14.5 Policy Options 537
15 Concluding Remarks 541
15.1 Challenging Neighbours? 541
15.2 Strengths and Weaknesses of This Study 543
References 545
List of Figures 579
List of Tables 581
List of Boxes 587
List of Acknowledgements 591
1 Comparing German and Dutch Institutions
What is so challenging about Gennany and the Netherlands being neighbours? In
tenns of arable area (united) Gennany is alm ost nine times the size of the Nether
lands, the Gennan population is over five times as large as the Dutch population
and the ratio of gross domestic products of the two countries equals a factor six.
From another perspective, consumption per capita differs to a much less extent and
is in both countries among the highest in the world. Also, macro economic
investment ratios are hardly different. So, why compare two countries, which apart
from size seem to be so much alike? Yet, the structure of the enterprise sector
clearly differs, just as several features of the welfare state. Do significant
differences exist after all? These and similar questions may arise with a compara
tive study between Gennany and the Netherlands. Accordingly, these consider
ations constitute the core subject of this introductory chapter.
This chapter focuses on the motivation and the background of the study.
Furthennore, it also summarizes the study's main results. Section 1.1 addresses the
reasons for a comparative study of Gennan and Dutch institutions. Section 1.2
provides an overview of the contents of the book and presents policy options.
1.1 Motivation
Four questions guide the organisation of the first part of this chapter. Section 1.1.1
asks 'Why a comparative study?'. It considers what can be leamed from a
comparative economic analysis. Section 1.1.2 poses the question: 'Why focus on
institutions?' . It addresses the reasons and limitations behind the principal
characteristic of the study: the institutional approach. Sec ti on 1.1.3 asks 'Why a
qualitative analytical method?' It turns to the motivation for the study's analytical
framework, which heavily leans on economic theory. The question 'Why
Gennany?', is addressed in Section 1.1.4, which discusses the reasons for a
comparison between Gennany and the Netherlands.
1.1.1 Why a Comparative Study?
Two objectives guide this comparative study of Gennany and the Netherlands. The
first is to broaden the insight in the Gennan and Dutch economies' strengths and
