This article analyzes profit taxation according to the arm's length principle in a model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium,...

An important puzzle in corporate taxation is that effective tax rates have fallen significantly while tax revenue has simultaneously risen in most countries. Moreover, the gross profitability of firms seems to be lower in high-tax countries, even though standard models of international...

In the absence of financing frictions, profit taxes reduce investment by their effect on the user cost of capital. With finance constraints due to moral hazard, investment becomes sensitive to cash-flow and own equity of firms. We propose a corporate finance model of investment and derive three...

We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyer trust, that higher...

What were the economic consequences of the 2007/08 oil price hike for Germany? In this paper we use a structural vector autoregressive model to study the effects of oil price changes driven by different supply and demand shocks on the German economy. We find that a higher oil bill always stifles...

In this paper we re-evaluate the hypothesis that the development of the financial sector was an essential factor behind economic growth in 19th century Germany. We apply a structural VAR framework to a new annual data set from 1870 to 1912 that was initially recorded by Walther Hoffmann (1965)....

Research on immigrants' educational disadvantages largely focuses on differences in student achievement tests. Exploiting data from the German PIRLS extension, we find that second-generation immigrants face additional disadvantages with respect to grades and teacher recommendations for secondary...

This paper investigates competition between health insurance companies under different financing regulations. We consider two alternatives advanced in recent German health care reform discussions: competition by contribution rates (health contributions) and by fees (health premia). We find that...

Income inequality in Germany has been continuously increasing during the past 20 years. In general, this is understood as an increase in inequality of wages due to changes in bargaining power of employees. However, the role of changing household structure is widely neglected. Societal trends...

The IFO Business Climate is the most important indicator for the business cycle in Germany. In 1993 the connection between the two components of the business climate – business situation and business expectations – was graphically portrayed by Ifo in a 4-quadrant scheme: the IFO Business...