Germany is in a dilemma. Low wage competition via product and factor markets increases the demands on the welfare state, but increased systems competition in the context of international factor mobility reduces the possibilities of maintaining it. The welfare states has important allocation...

The Ifo Institute has worked out a detailed proposal to reform the system of welfare benefits and made estimates regarding the consequences for employment, distribution of income and fiscal costs. The Ifo proposal aims at making the German labour market functional again without lowering the...