By Omar Feraboli, Chemnitz

JEL E10, F11, F13
Dynamic computable general equilibrium, Jordan, trade liberalisation.

Summary
This paper aims at assessing the impact on the Jordanian economy of the Association Agreement with the European Union. The Agreement eliminates progressively tariffs on most industrial goods imported by Jordan from the EU. Counteracting fiscal measures are required in order to offset the loss in government revenue. In order to capture intertemporal effects brought about by trade liberalisation on Jordan, a dynamic CGE model is specified and calibrated. Simulation results show that the implementation of the Agreement raises consumer welfare and has positive effects on all macroeconomic variables in the long-run, but it reduces consumption in the short-run.

By Johannes Gernandt and Friedhelm Pfeiffer, Mannheim

JEL J21, J24, J31
Wage inequality, skill structure, real wages, tenure.

Summary
The paper investigates the evolution of wages and wage inequality in Germany based on the GSOEP. Between 1994 and 2005 wage inequality, measured by the ratio of the ninetieth to tenth percentile of the wage distribution, increased from 2.5 to 3.1 in West Germany and from 2.4 to 3.2 in East Germany. In West Germany rising wage inequality occurred mainly in the lower part of the wage distribution, whereas in East Germany wage inequality predominantly increased in the upper part of the wage distribution. In West Germany the group of workers with low tenure experienced highest increases in wage inequality.

Reform of Local Fiscal Relationships: Communal Share of German Value-added Tax with Elements of Interregional Business Tax Competition

Von Tony Mudrack, Döbern

JEL H25, H26, H61, H71, H77
Financial relationships, German fiscal federalism, business taxation, German taxation system.

Summary
Many voices are calling for the abolition of the German Business tax. As one of the main sources of tax revenues for German local authority it is subject to economic cycle volatility, because it is a tax on profit. This paper presents a plan for reforming the local fiscal relationships. It argues for the preservation of the German Business tax while stabilising the revenues of German local authorities by a share of the German Value-added tax (German: Umsatzsteuer). This share is distributed to local authorities by their individual share of local revenues of German business tax and total tax revenues.

By Joachim Wagner, Lueneburg

JEL F14, D21
Exports, productivity, micro data, Germany.

Summary
Using unique recently released nationally representative high-quality data at the plant level, this paper presents the first comprehensive evidence on the relationship between productivity and size of the export market for Germany, a leading actor on the world market for manufactured goods. It documents that firms that export to countries inside the euro-zone are more productive than firms that sell their products in Germany only, but less productive than firms that export to countries outside the euro-zone, too. This is in line with the hypothesis that export markets outside the euro-zone have higher entry costs that can only be paid by more productive firms.