This study was written while I was a doctoral student in the Graduier- tenkolleg Finanz-und Gutermiirkte at the University of Mannheim; it has been accepted as a doctoral dissertation in February 1997. I am indebted to my advisors, Professors Axel Borsch-Supan and Martin Hellwig at Mannheim and John Rust at Madison, for their encouragement and for many helpful discussions and comments. At various stages, I benefited from comments on portions of the manu- script by, and from discussions with, Thomas Astebro, Charles Calomiris, Timothy Dunne, Frank Gerhard, Annette Kohler, Jens Koke, Stephan Monissen, Gordon Phillips, Winfried Pohlmeier, Kenneth Troske, Wol- fram Wissler and seminar participants at Columbia Business School, the University of Mannheim, the University of Tiibingen, the University of Wisconsin at Madison, Yale University, the ENTER Jamborees at Uni- versity College London, January 1995, and at Tilburg University, January 1997, at a Meeting of the DFG-Schwerpunktprogramm Industrieokonomik und Inputmiirkte, Heidelberg, November 1996, and at the annual meeting of the Verein fur Socialpolitik, Bern, September 1997. Silke Januszewski and Melanie Liihrmann provided dedicated assistence during the prepa- ration of the final version of the manuscript.