Newsletter October 2017

All the political parties pledged in their campaign manifestos to encourage the digitalisation of Germany’s economy and society. This is a good thing. Armed with buzzwords like “Industry 4.0” and “digital hubs” or calls for a faster expansion of the country’s broadband networks, politicians from all sides are demanding that the pace of digital transformation pick up rapidly in various economic sectors and private companies. But the government might want to get its own house in order first. The level of digitalisation in the German public sector is well behind that of many other countries.

What is the status of European financial market integration? After passing legislation to create a banking union in 2014, the European Commission is now planning to establish the foundation for a capital markets union by 2019, in order to create a true single market for capital. This effort to increase the integration of Europe’s financial markets has the goal of stabilising economic growth while also making Europe more resilient to crisis. But what is the current state of play? In this Q&A, Karolin Kirschenmann, a financial economist at ZEW, sees a need for improvement in various areas, including how policymakers deal with insolvent banks, and how to vitalize securitisation markets.

Shortly after the outbreak of the financial crisis in 2007, the G20 agreed on a reform agenda consisting of regulatory measures to protect global financial markets from future crises. At this year’s G20 summit in Hamburg, the heads of state and government endorsed a structured framework for the evaluation of the reforms that have been implemented since 2007. What has become of the G20 reform goals? Are economies today really less likely to experience financial crises? And has it become possible to estimate the costs arising from cyclical fluctuations? Where is the interface between financial stability and monetary policy?

These are some of the questions Professor Claudia M. Buch, vice-president of the Deutsche Bundesbank, addressed in her lecture, which took place as part of the “First-Hand Information on Economic Policy” series at the Centre for European Economic Research (ZEW) in Mannheim on 17 October 2017. In her lecture, Claudia Buch argued that although financial stability is a national responsibility, global reforms addressing this issue should always be analysed and assessed on an international level.

At its most recent general assembly, the Sponsors’ Association for Science and Practice at the Centre for European Economic Research (ZEW) in Mannheim elected Dr. Georg Müller, chief executive at MVV Energie AG, as its new chair. Newly admitted to the association’s board were Dr. Ralph Rheinboldt, board member at Fuchs Petrolub SE, and Manfred Bauer, board member at MLP SE.
 

On 20 and 21 September 2017, the Leibniz ScienceCampus Mannheim Taxation (MaTax), together with ZEW and the University of Mannheim, hosted the fourth international annual MaTax conference on taxation research. The two-day conference offered participants a broad and diverse programme including 32 talks and two keynote lectures. In his opening speech, MaTax director and ZEW research professor Christoph Spengel addressed the 70 or so international researchers in attendance and expressed his delight over the overwhelmingly positive response the MaTax conference has continued to receive.
 

The Volksbank Weinheim Stiftung (Volksbank Weinheim Foundation) and the Centre for European Economic Research (ZEW) are again offering two research awards this year with the aim of supporting up-and-coming researchers in the region. The prizes will be awarded to the best doctoral dissertation (EUR 3,000) and the best master’s thesis (EUR 2,000) on the topic “The Future World of Work”. Award recipients will also have the opportunity to complete a research stay at ZEW. The deadline for submissions is 31 October 2017.

The Centre for European Economic Research (ZEW), the Institute for Applied Economic Research (IAW) and the Fraunhofer Institute for Systems and Innovation Research (ISI) have published a report on the current standing and future prospects of Baden-Württemberg as a business location in comparison to other locations both within Germany and abroad. The report was presented in Stuttgart by Dr. Nicole Hoffmeister-Kraut, Minister of Economic Affairs, Labour and Housing of the State of Baden-Württemberg and the participating research institutes, with ZEW represented by its president, Professor Achim Wambach.

How can we unmask fake news? What are the opportunities and risks of innovation strategies? Can we make European integration work? These are just some of the serious challenges our society finds itself faced with. On 28 and 29 September 2017, around 200 high school students presented and debated their solutions to a number of global economic issues at the third YES! – Young Economic Summit in Kiel. BBS Wirtschaft 1 Ludwigshafen’s idea for a “company gateway” for start-ups was particularly convincing and was honoured with the 2017 YES! Award. ZEW is a YES! research partner and mentored the winning team as well as ten other teams from the Southwest region.

From 18 to 20 September 2017 ZEW hosted the College for Interdisciplinary Educational Research’s (CIDER) Autumn 2017 workshop. The College, set up and funded by the Federal Ministry of Education and Research, the Jacobs Foundation and seven institutes within the Leibniz Association, has been supporting outstanding young researchers (referred to as fellows) based at European research institutions since 2012, helping them to develop further their own projects in the field of interdisciplinary educational research. As one of CIDER’s founding institutes, ZEW brings an economic perspective to educational research.

As a means of addressing the lack of global progress towards the appropriate taxation of profits made by companies in the digital economy, the EU Commission recently proposed a number of possible measures to tax these companies more fairly in the Communication entitled “A Fair and Efficient Tax System in the European Union for the Digital Single Market“.

The German Real Estate Finance Index (DIFI) by ZEW and JLL decreased by 1.7 points in the third quarter of 2017 to a current reading of -7.2 points. Despite a climb of 4.4 points to 9.8 points in the assessment of the current financing situation, the sentiment index for commercial real estate financing remains negative for the third quarter in a row. Once again the cause is the far worse assessment of the predicted financing situation for the next six months.

The Mannheim Centre for Competition and Innovation (MaCCI), a joint initiative of the Centre for European Economic Research (ZEW) and the University of Mannheim, is pleased to announce its 2018 annual conference in Mannheim on 8–9 March 2018. The conference provides a platform for competition- and innovation-related research and discussion. We invite submissions from all fields of competition law and economics. Theoretical and empirical as well as case-oriented papers are welcome. We especially invite papers from lawyers with a focus on EU competition law and/or comparative competition law. Please submit full papers as well as extended abstracts in PDF format to macciannual2018@zew.de no later than 18 December 2017.
 

The Institute for Employment Research (IAB) and the Centre for European Economic Research (ZEW) are jointly organizing the international conference on demographics, immigration and the labor market on 6 and 7 April 2018. The conference focuses on demographic change and immigration in industrialized countries and on the ways these phenomena interact with employment, wages, and participation in the labor market. Researchers are invited to submit empirical and theoretical contributions on this topic from all areas of economics and sociology. Please submit full papers as a PDF file to dfg1764@zew.de no later than 20 December 2017.

In the most recent survey for October (29/09–17/10/2017) expectations regarding the economic climate in China rose considerably, with the index climbing 9.0 points to a current level of 17.3 points (compared to 8.3 points in September). The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, has thus once again come in well above the long-term average of 5.3 points.

After the slow but steady upward trend witnessed since the turn of the millennium, M&A activities in the airline industry are for the first time experiencing a downward trend again. Since the beginning of 2000, the number of M&As involving businesses in the airline industry has averaged 97 transactions per year, with global transactions between 2007 and 2015 even amounting to more than 100 per year. In 2016, however, this number went down to 86 transactions. These are the findings of studies carried out by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.

The ZEW Indicator of Economic Sentiment for Germany continued to improve in October 2017, however, not as strongly as in the previous month. The indicator currently stands at 17.6 points, which corresponds to an increase of 0.6 points compared with the September result. The indicator, however, still remains below the long-term average of 23.8 points. “The improved outlook for the coming six months is not least the result of the surprisingly positive growth figures seen in the previous months.

In August, figures for both production and incoming orders were significantly better than expected. The framework conditions for German exports, which have already seen a significant rise, are further improved by positive growth figures for Europe. The fact that the inflation rate is rising again, and expected to climb further, equally points towards a positive economic development in Germany, making a change in the ECB’s monetary policy more likely,“ comments ZEW President Professor Achim Wambach.

After a strong start to the year 2017, the number of mergers and acquisitions (M&A) involving German firms has fallen. This trend is clearly discernible in the ZEW-ZEPHYR M&A Index, which reflects the number of M&A transactions conducted in Germany on a monthly basis. While back in January 2017, the index reached 145 points – its highest level since January 2009 – by July, it had fallen to 75 points. This seems to indicate that the continuing upward trend in mergers and acquisitions involving German firms has stalled. These are the findings of the latest M&A report carried out by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.
 

The EU and Germany are already profiting from the UK’s decision to leave the EU. According to the assessment of German managers working in China, Brexit is offering many European companies the opportunity to expand their trade with China. These are the findings of the ZEW-PwC China Economic Barometer, a survey carried out by the Centre for European Economic Research (ZEW), Mannheim, together with the accounting and consulting firm PricewaterhouseCoopers (PwC), for the fourth quarter of 2017.

Planned reforms of income tax and the “solidarity surcharge” in Germany differ wildly depending on which political camp they come from. By far the greatest variation is visible in the taxation of private households. Total tax relief based on the various parties’ tax plans could range from 1.5 billion to 34.6 billion euros, while the average disposable income of private households could rise from anywhere between 107 to 905 euros a year. In all of the suggested tax reform plans, the absolute tax reductions for households (in euros) for the most part increase with income.

These are the principal findings of a joint study conducted by the Centre for European Economic Research (ZEW), Mannheim, and the IZA – Institute of Labor Economics, Bonn, on behalf of the German Federal Ministry for Economic Affairs and Energy.

In the aftermath of the independence referendum in Catalonia, supporters and opponents of Catalan secession remain bitterly divided. The chaotic conflict surrounding the referendum represents a severe test to Spanish unity. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW) in Mannheim, offers his view on the referendum and its implications for a potential European fiscal union.

The local multipliers for the German property tax B, which is levied on residential real estate property by the municipalities, can vary greatly from region to region. Under otherwise comparable conditions, property in municipalities where most residents are home-owners is taxed at a lower rate than in municipalities where most residents live in rented accommodation. These are the findings of a joint study carried out by the Centre for European Economic Research (ZEW) in Mannheim and the University of St. Gallen.
 

Daniel Günther, Minister President of Schleswig-Holstein, announced the winners of the German economics competition YES! – Young Economic Summit 2017: The student team from BBS Wirtschaft 1 Ludwigshafen won the vote for the best solution and brought home the 2017 YES! Award.
 

Our publications are available for download in PDF format. PDF files can be viewed using for example the Acrobat Reader, which you can download for free at https://acrobat. adobe. com/us/en/acrobat/pdf-reader. html

Niklas Dürr; Kai Hüschelrath
Patterns of Entry and
 Exit in the Deregulated German Interurban Bus Industry

Dominik von Hagen; Fabian Nicolas Pönnighaus
International Taxation and M&A Prices

Kornelius Kraft
Productivity and Distribution Effects of Codetermination in an Efficient Bargaining

Carlo Gallier
Democracy and Compliance in Public Goods Games

Sven Heim; Kai Hüschelrath; Ulrich Laitenberger; Yossi Spiegel
Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs

Roland Füss; Oliver Lerbs
Do Local Governments Tax Homeowner Communities Differently?

Nicolas Fugger, Thilo Klein, and Tobias Riehm
Dezentrale Kitaplatzvergabe ohne Warteschlange: Ein Leitfaden (Avoiding Queues by Implementing a Decentralised Allocation System for Nursery School Places: A Guideline)

Marius Berger, Bernhard Boockmann, Gabriel Felbermayr, Charlotte Klempt, Andreas Koch, Wilhelm Kohler, Christian Lerch, Peter Neuhäusler, and Christian Rammer
Strukturanalyse und Perspektiven des Wirtschaftsstandortes Baden-Württemberg im nationalen und internationalen Vergleich (Current Standing and Future Prospects of Baden-Württemberg as a Business Location in Comparison to Locations in Germany and Abroad)

Verena Dutt, Christoph Spengel, and Heiko Vay
Der EU-Vorschlag zum Country-by-Country Reporting im Internet: Kosten, Nutzen, Konsequenzen (EU Proposal on the Introduction of Country-by-Country Reporting via the Internet: Costs, Benefits and Consequences)

Florian Buhlmann, Sebastian Camarero Garcia, Holger Stichnoth, Holger Bonin, Nico Pestel, and Eric Sommer
Ökonomische Bewertung verschiedener Reformoptionen im deutschen Steuer- und Transfersystem – Kurzexpertise 1 (Economic Assessment of Different Reform Options in the German Tax and Transfer System – Short Expert Report 1)

Andreas Peichl, Paul Hufe, Iryna Kyzyma, and Martin Ungerer
Wohlstand für alle (Welfare for All)

Birgit Gehrke and Christian Rammer
Innovationsindikatoren Chemie 2017 (Innovation Indicators for the Chemical Industry 2017)

Jürgen Egeln, Sandra Gottschalk, Bettina Müller, and Niclas Rüffer
IAB·ZEW Gründungspanel (IAB·ZEW Start-up Panel)

Effective Levels of Company Taxation within an Enlarged European Union and Related Supporting Services, Update 2017

Growth Potential of the Digital Transformation

Software Infrastructure for Behavioral Experiments and Automated Internet Data Collections

Swiss Report on Research and Innovation 2018: Comparing Switzerland with Selected Regions

Text Data Based Output Indicators as Base of a New Innovation Metric

Location of the event: ZEW, Mannheim

Speaker: Professor Dr. Nadja Dwenger (University of Hohenheim)
Location of the event: ZEW, Mannheim

Speaker: Dragan Jovanovic (Deutsche Telekom AG)
Location of the event: University of Mannheim

Location of the event: ZEW, Mannheim

Speaker: Professor Luis Cabral, PhD (NYU's Stern School of Business, New York)
Location of the event: ZEW, Mannheim

Speaker: Tarek M. Harchaoui, PhD (University of Groningen)
Location of the event: ZEW, Mannheim

Speaker: Dr. Pierre Regibeau (Charles River Associates (CRA))
Location of the event: University of Mannheim

Speaker: Professor Dr. Lorenzo Cappellari (Università Cattolica Milan)
Location of the event: ZEW, Mannheim

Speaker: Giulio Federico (Barcelona Graduate School of Economics)
Location of the event: University of Mannheim

Speakers: Dr. Georg Licht (ZEW) , Philippe Gluntz (Paris Business Angels), Ute Günther (Business Angels Netzwerk Deutschland e.V. (BAND)), Helen Köpman (DG Connect, European Commission), Eurico Neves (Inova+ S.A.), Dr. Maikel Pellens (ZEW)
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Brussels

Speaker: Professor Dr. Christoph M. Schmidt (Chairman of the German Council of Economic Experts)
Location of the event: ZEW, Mannheim

Speaker: Brigitte Zypries, MdB (Federal Minister for Economic Affairs and Energy)
Location of the event: ZEW, Mannheim

Picture Credits: press release of 9 October 2017: iStock.com/gollykim, press release of 6 October 2017: iStock.com/Oscar Garriga, press release of 6 October 2017: iStock.com/Bestgreenscreen
 
All further pictures: ©ZEW