Adaptation is omnipresent but people systematically fail to correctly anticipate the degree to which they adapt. This leads individuals to make inefficient intertemporal decisions. This paper concerns optimal income taxation to correct for such anticipation-biases in a framework where consumers...

We apply the Day Reconstruction Method to compare unemployed and employed people with respect to their subjective assessment of emotional affects, differences in the composition and duration of activities during the course of a day, and their self-reported life satisfaction. Employed persons are...

How can we assess the welfare of a society, its evolution over time and predict its change due to particular policy interventions? One way is to use survey-based welfare indicators such as the OECD Better Life Index. It invites people to weight a variety of quality of life indicators according...

In oligopolistic industries that are unionised and may be affected by offshoring, falling offshoring costs have a moderating effect on trade unions. They will accept lower sector wages in order to discourage mobile forms from leaving the country. Since such wages are independent of the workers'...

Climate protection should use environmental policy instruments that raise revenues, which can be used, for instance, to cut labour taxes to alleviate unemployment in economies suffering from high and persistent unemployment. This paper elaborates the possibilities of an employment dividend of...

Individual labour productivities are often unobservable for firms when hiring new workers. Job protection may prevent firms ex post from using information about labour productivities. We show that a binding minimum wage introduced in the presence of job protection will lead to lower unemployment...

Societies see growing support for populist politicians who advocate an end to globalization. Our behavioral economics model links impatience to voters' appraisals of an income shock due to globalization that is associated with short-run costs and delayed gains. The model shows that impatient...

This paper examines the implications of habit formation in private and public consumption for the Pareto-efficient provision of public goods, based on a two-period model with nonlinear taxation. If the public good supply is time-invariant, the presence of habit formation generally alters the...

Using data from the 2006 wave of the German Socio-Economic Panel (GSOEP), this paper analyzes how a minimum wage affects employment, wage inequality, public expenditures, and aggregate income in the low-wage sector. It is shown that a statutory minimum wage of EUR 7.50 per hour would cost...

Do minimum wages reduce in-work-poverty and wage inequality? Or can alternative policies do better? We evaluate theses issues for the exemplary case of Germany that suffers from high unemployment among low-skilled workers and rising wage dispersion at the bottom of the wage distribution. We...