Economic Policy - Number 4

The fourth issue of Economic Policy is now available. It contains specially commissioned papers on topical policy issues, together with comments by a distinguished panel of European and US economists.

ANTI-POVERTY PROGRAMMES
Ravi Kanbur examines means-testing. Although means-tested benefits alleviate poverty more effectively, greater means-testing is politically infeasible unless the non-poor are willing to increase net transfers to the poor. He also argues that the UK benefit system would reduce poverty more effectively if resources were shifted towards the unemployed.

GERMAN FISCAL POLICY
Gerhard Fels and Hans-Peter Frohlich argue that fiscal expansion in Germany would reduce output, through 'crowding-out' and reduced business confidence. The more austere policies pursued since 1982 have boosted growth, Fels and Frohlich conclude that German policy-makers would not bow to US pressure for fiscal expansion.

BANKING DEREGULATION
Ernst. Baltensperger and Jean Dermine examine whether the European Banking Industry should be deregulated. Popular fears may be unfounded: deregulation can increase the stability of financial markets, the authors find.

EXPORT SUBSIDIES
Jacques Melitz and Patrick Messerlin show that temporary export credit subsidies can improve the trade-off between inflation and un-employment. But the French experience of subsidies, which were highly selective and distortionary, reveals that in practice they had adverse supply-side effects.

PROFIT-RELATED PAY
Saul Estrin, Paul Grout and Sushil Wadhwani examine whether profit-related pay (PRP) will reduce unemployment by making real wages more fIexible. They conclude that PRP is unlikely to alter the wage-bargaining process or unemployment, although it may boost productivity.