Newsletter December 2017

Dear Readers,
 
An eventful year is coming to a close. With this e-mail, you are receiving the last issue of the ZEW Newsletter English edition in 2017. We would like to take this opportunity to thank your for your sustained interest in news from ZEW and do hope that you will find interesting news in the last 2017 issue of the ZEW Newsletter English
edition. We wish you and your loved ones a pleasant festive season and a prosperous, healthy 2018!
 
Best wishes,
the ZEW Newsletter editorial team

The collapse of the coalition talks in Berlin risks squandering a key opportunity to shape Germany’s energy transition by linking ecological goals with efficient economic regulation. The clean-energy transition poses enormous challenges. Accordingly, it is imperative to harmonise ecological necessity with economic efficiency. Germany is a prosperous country with a strong culture of public debate. Should Germany fail to meet the challenges in this area, it will sacrifice its role as a vanguard in climate policy.

ZEW will once again be attending the ASSA Annual Meeting held in the United States in 2018. The event, which this year will take place from 5 to 7 January in Philadelphia, is set to welcome over 13,000 participants, making it the most important conference in the world for economists. The conference is jointly organised by the American Economic Association (AEA) and the Allied Social Sciences Association (ASSA).

Will artificial intelligence soon take over customer service? Discussions on automation have tended to focus heavily on the use of robotics in the production sector. Yet service robots endowed with artificial intelligence also allow for automation in more complex settings, such as customer service. In this Q&A, ZEW economist Irene Bertschek discusses descriptive evidence on the use of service robots in Germany’s IT industry. The evidence was gathered in a collaborative study carried out by the ZEW team and Professor Martin Przewloka (University of Marburg).

The significance of the ICT (information and communication technologies) sector for the German economy has continued to grow, with gross value added in this sector rising by 3.8 per cent to 105 billion euros in 2016. With more than 1.1 million people employed in the German ICT sector, this branch of economy also appears to be a long-term job creator. These are the findings of the Monitoring Report DIGITAL Economy 2017, a report published regularly by the Centre for European Economic Research (ZEW), Mannheim, in cooperation with the market research institute Kantar TNS and commissioned by the German Federal Ministry for Economic Affairs and Energy (BMWi).

The German Real Estate Finance Index (DIFI) run by ZEW and JLL climbed 7.3 points in the fourth quarter of 2017 to a current reading of 0.1 points, moving into positive territory for the first time this year. The assessment of the current financing situation for commercial real estate remained almost unchanged at 9.6 points compared to the previous quarter. The improved expectations for financing conditions in the coming six months can be seen in the context of the very positive economic outlook, which has been corrected upwards by various research institutes.

There are many different ideas about what the future of the EU should look like, but one particularly controversial issue is how the different powers and responsibilities within Europe should be divided between Brussels and the Member States. Reformers need to ask themselves, in which areas of policy do we need more Europe, and in which could we do with less? Where might the competencies of the national states in policy design be best put to use and where might a centralised decision-making process in Brussels prove more productive?

A study carried out by the Centre for European Economic Research (ZEW), Mannheim, on behalf of the Bertelsmann Stiftung looking at the main areas of EU policy has found that shifting competencies in certain areas either to the Member States or to Brussels could save money and make the process of political decision-making in Europe more efficient.

In 2016 Germany’s cultural and creative industries once again experienced an increase in both revenue and the number of employees. While total revenue rose by more than 1.5 per cent to 154.4 billion euros, the number of core employees working in this sector – i.e. the total of both self-employed workers and employees subject to social insurance contributions – climbed almost three per cent to over 1.1 million. These are the findings of the 2017 monitoring report on the state of the cultural and creative industries in Germany regularly compiled by the Centre for European Economic Research (ZEW), Mannheim, and the Fraunhofer Institute for Systems and Innovation Research (ISI) as part of the German federal government’s Cultural and Creative Industries Initiative.

On 5 December 2017, researchers from ZEW presented their research findings at the scientific forum WISSENSWERTE, which this year was held in Darmstadt. Among the researchers in attendance were Professor Irene Bertschek and Dr. Ulrich Zierahn, who discussed digitalisation in the workplace as well as the opportunities and challenges of Industry 4.0 at a number of different events held throughout the day.

Consumers in Germany are becoming increasingly used to the low interest rate environment. They are, however, still unwilling to accept negative interest on bank deposits. These are the findings of a recent survey on the influence of the low interest rate environment on the savings behaviour of bank customers. The survey was carried out by the Centre for European Economic Research (ZEW) in Mannheim on behalf of ING-DiBa AG.

Every year the German Federal Insurance Office distributes more than 200 billion euros from the healthcare fund to the statutory health insurance providers. The allocation of these funds is, however, somewhat controversial. The principle behind the allocation makes sense; health insurance providers ought to receive as much money for each insured individual as that individual is going to cost the insurer in the following year. That way, health insurance providers have no incentive to turn away insured people who are sick or treat them poorly simply because they incur higher costs, since for these people, insurers receive additional money from the healthcare fund. Although this principle is widely accepted, its practical implementation has been a continual source of contention.

Europe is currently doing well economically, and Germany even more so. The next German government should take advantage of these economic tailwinds to push through reforms – especially given the major challenges it is currently facing, such as demographic change, climate protection, migration, digitalisation and the further development of the EU. These were the main points highlighted by Professor Christoph M. Schmidt, chair of the German Council of Economic Experts and president of the RWI – Leibniz Institute for Economic Research, in his presentation of the council’s Annual Report 2017/2018 at the Centre for European Economic Research (ZEW), Mannheim.

On 28 November 2017, Professor Schmidt gave the audience an outline of the council’s recently published annual report as part of the lecture series First-Hand Information on Economic Policy and shed light on the policy areas which the council considers necessary to be readjusted by the German government and the EU.

The Centre for European Economic Research (ZEW) is pleased to announce that the annual ZEW Public Finance Conference on the future of fiscal policy coordination in Europe will take place in Mannheim on 23 and 24 April 2018. Submissions relating to the focus of this year’s conference are particularly welcome, though we also encourage submissions from all other areas of public economics and political economy. Please submit your paper via the conference management website no later than 15 February 2018. No conference fee will be charged for participants presenting a paper.

Professor Irene Bertschek, head of the Research Department “Digital Economy” at the Centre for European Economic Research (ZEW), Mannheim, was appointed as a professor in the Faculty of Economics and Business Studies at the Justus Liebig University (JLU) Giessen on 1 December 2017. The joint appointment of Bertschek by the University of Giessen and ZEW will help to strengthen the already close connection between the two institutions.

Andreas Distel, PhD, was a visiting researcher in ZEW’s Research Department “Economics of Innovation and Industrial Dynamics” from 30 November until 4 December 2017. He works as a postdoctoral researcher at the Copenhagen Business School in Denmark. His research focuses on the drivers of strategic adaptation and open/collaborative innovation in an increasingly interconnected world, using primarily quantitative methods. During his visit, Andreas Distel exchanged ideas with ZEW researchers about internationalisation strategies of young firms.

Following two record years for mergers and acquisitions (M&A) worldwide in 2015 and 2016, this trend appears to have reversed in 2017. In November 2017, the ZEW-ZEPHYR M&A Volume per Deal Index’s twelve-month moving average was at 113 points, its lowest level since April 2015. November was the eleventh month in a row that the twelve-month moving average continued to fall, a trend that was last seen during the later stages of the financial crisis in 2009. 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.

In the most recent survey conducted in December (4–13 December 2017) expectations for the Chinese economy fell once again, leaving the index at a level of minus 10.7 points, 18.3 points lower than in November. 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 below the long-term average of 5.1 points.

Often referred to with buzzwords like “crowdworking” or the “gig economy”, working via internet platforms is currently a subject of public debate. Examples include the ride service app Uber or the tagging of images on a platform like Amazon Mechanical Turk. The prevalence of this type of employment, where services are issued and in some cases carried out via online platforms, is, however, currently extremely low. Furthermore, on the basis of existing research findings, it is still difficult to assess whether the opportunities of platform-based working outweigh the risks.

These are the findings of a recent study carried out by the Centre for European Economic Research (ZEW) in Mannheim on behalf of the German Federal Ministry of Labour and Social Affairs.

US Congress is fast approaching a consensus on a comprehensive tax reform. Though certain details still remain to be decided, it looks like US companies can expect to see their tax bills go down considerably. The reform will also lead to radical changes in how corporations are taxed in the United States. From now on, the US tax authorities will no longer tax the worldwide income of US companies; instead, following the concept of territoriality, only profits generated in the United States will be subject to tax. The Centre for European Economic Research (ZEW) in Mannheim together with the University of Mannheim have conducted a comprehensive study analysing the effects of this reform on international tax competition.

The ZEW Indicator of Economic Sentiment for Germany records a decrease of 1.3 points in December 2017 and now stands at 17.4 points. The indicator thus still remains below the long-term average of 23.7 points. The assessment of the current economic situation in Germany increased by 0.5 points, with the corresponding indicator currently standing at 89.3 points.

The success of Germany’s planned “energy transition” depends largely on how willing companies are to drive innovations in renewable energy forward. New regulations, government subsidies and rising fossil fuel prices are not the only decisive factors for this shift in energy usage. According to a recent study conducted by the Centre for European Economic Research (ZEW), Mannheim, and the Augsburg University of Applied Sciences, regional factors may also come into play, with German companies located near renewable energy plants and in regions with a high percentage of Green Party voters being more likely to invest in renewable energy.

How much corporate customers of banks invest in innovations largely depends on the financing opportunities provided to them. Financial distress of banks as a result of macroeconomic shocks, however, has an impact on the innovation performance of their corporate clients. In times of tensions on financial markets, businesses most likely reduce their innovation activities if “their” banks are particularly hard hit by the distortions in the interbank market. These are the findings of a recent study carried out by the Centre for European Economic Research (ZEW) in Mannheim.
 

According to official statistics, in 2016 around 330,000 households in Germany had their power cut off because of unpaid energy bills. In this respect, families with children are much more likely to be affected than other consumers. This also holds for recipients of basic unemployment benefits since they have an increased risk of falling behind with their payments. As a consequence, the probability of receiving disconnection notices and facing electricity cut-offs is higher for these households than for others. Individuals with a low level of education as well as single-person households have a small chance of averting impending power cut-offs.

Furthermore, the probability of a disconnection is particularly high among households who are in debt.

Contracting out, that is, firms hiring external staff from other firms to perform services for them, is widespread in Germany. Almost 90 per cent of all German firms outsource at least one of their core business functions, i.e. processes that directly serve the firm’s main purpose. On top of this, 60 per cent of firms outsource at least one process which has a supportive function within the firm. There are a variety of different reasons for the prevalence of service contracts. For example, one of the most common motives for using service contracts is the possibility to acquire specialised personnel or services on a temporary basis.

Furthermore, not only can the working conditions of workers hired under service contracts vary greatly, but the implementation of contractual agreements can differ too.

Our publications are available to 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

This issue contains the M&A Report focusing on “Mergers and Acquisitions in Germany: German M&A Index Suggests Reversal in Trend Regarding Number of Transactions”.

Thilo Klein
Intermediation in Peer-to-Peer Markets: Evidence from Auctions for Personal Loans

Andreas Löschel; Benjamin Johannes Lutz; Philipp Massier
Credit Constraints, Energy Management Practices, and Investments in Energy Saving Technologies: German Manufacturing in Close-up

Carlo Gallier; Martin Kesternich; Andreas Löschel; Israel Waichman
Ratchet up or down? An Experimental Investigation of Global Public Good Provision in the United Nations Youth Associations Network

Raphael Epperson; Christiane Reif
Matching Schemes and Public Goods: A Review

Karolin Kirschenmann; Josef Korte; Sascha Steffen
The Zero Risk Fallacy? Banks' Sovereign Exposure and Sovereign Risk Spillovers

Benjamin Johannes Lutz; Philipp Massier; Katrin Sommerfeld; Andreas Löschel
Drivers of Energy Efficiency in German Manufacturing: A Firm-level Stochastic Frontier Analysis

Martin Achtnicht; Robert Germeshausen; Katherine von Graevenitz
Does the Stick Make the Carrot More Attractive? State Mandates and Uptake of Renewable Heating Technologies

Katharina Nicolay; Hannah Nusser; Olena Pfeiffer
On the Interdependency of Profit Shifting Channels and the Effectiveness of Anti-Avoidance Legislation

Mark Andor; Daniel Osberghaus; Michael Simora
Natural Disasters and Governmental Aid: Is There a Charity Hazard?

Marek Giebel; Kornelius Kraft
External Financing Constraints and Firm’s Innovative Activities During the Financial Crisis

Jan Kinne; Bernd Resch
Analysing and Predicting Micro-Location Patterns of Software Firms

Dominik von Hagen; Christoph Harendt
Impact of Controlled Foreign Corporation Rules on Post-acquisition Investment and Profit Shifting in Targets

Florian Buhlmann; Benjamin Elsner; Andreas Peichl
Tax Refunds and Income Manipulation Evidence from the EITC

Christoph Spengel, Friedrich Heinemann, Marcel Olbert, Olena Pfeiffer, Thomas Schwab and Kathrin Stutzenberger
Analysis of US Corporate Tax Reform Proposals and their Effects for Europe and Germany

Peter Heindl; Verena Liessem
Ursachen von Stromsperren in Privathaushalten: Empirische Ergebnisse aus der Allgemeinen Sozialberatung (Reasons for Power Cut-Offs in Private Households: Empirical Results from Social Counselling Centres)

Sabine Graumann, Irene Bertschek, Tobias Weber, Martin Ebert, Michael Weinzierl, Jörg Ohnemus, Christian Rammer, Thomas Niebel, Patrick Schulte and Johannes Bersch
Monitoring-Report Wirtschaft DIGITAL 2017 (Monitoring Report DIGITAL Economy 2017)

Sabine Graumann, Irene Bertschek, Tobias Weber, Martin Ebert, Michael Weinzierl, Jörg Ohnemus, Christian Rammer, Thomas Niebel, Patrick Schulte and Johannes Bersch
Monitoring-Report Wirtschaft DIGITAL 2017 - Kurzfassung (Monitoring Report DIGITAL Economy 2017 - Short version)

Irene Bertschek, Jörg Ohnemus, Daniel Erdsiek, Simone Kimpeler and Christian Rammer
Monitoringbericht der Kultur- und Kreativwirtschaft 2017 (Monitoring Report Cultural and Creative Industries 2017)

Contribution of Digitisation to Productivity in the Construction Industry

How Europe Can Deliver

Innovation and the Future of Work

Knowledge Spillovers from Product and Process Inventions in Patents and their Impact on Firm Performance

Investments in New Forms of Knowledge-Based Capital (INFOWIK)

Strategies to Encourage European Identity

The German Real Estate Transfer Tax and Local Government Revenues

Speaker: Dr. Heiko Stüber (Friedrich-Alexander University Erlangen-Nuremberg and Institute for Employment Research (IAB))
Location of the event: ZEW, Mannheim

Loccation of the event: ZEW, Mannheim

Location of the event: Allianz Forum, Berlin

Speaker: Prof. Julien Grenet, PhD (Paris School of Economics)
Loccation of the event: ZEW, Mannheim

Speaker: Aart De Geus (Bertelsmann Stiftung), Günther H. Oettinger (European Commission), Prof. Dr. Friedrich Heinemann (ZEW), Stefan Lehner (European Commission), Petri Sarvamaa, MEP (European Parliament), Prof. Achim Wambach, PhD (ZEW)
Moderation: Silke Wettach (Wirtschaftswoche)
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Brussels

Speaker: Dr. Rolf Martin Schmitz (Chairman of the Executive Board and Chief Executive Officer of RWE AG )
Location of the event: ZEW, Mannheim

Postdoctoral Researcher (100%) in the Research Department “Environmental and Resource Economics, Environmental Management“

Researcher (100%) (PhD student or postdoc) for the Research Group “Market Design“

Researcher (100%) (PhD student or postdoc) for the Research Department “Digital Economy“

Postdoctoral or Advanced Graduate Researcher (100%) “Public Procurement in Europe“ for the Research Department “Corporate Taxation and Public Finance“

Postdoctoral Researcher (100%) “Corporate Taxation“ for the Research Department “Corporate Taxation and Public Finance“

Picture Credits: press release of 30 November2017: iStock.com/ismagilov, press release of 4 December 2017: iStock.com/chameleonseye, press release of 6 December 2017: iStock.com/ansonsaw, press release of 11 December 2017: iStock.com/grandriver, press release of 13 December 2017: iStockphoto/400tmax, personalia article of 13 December 2017: Rolf K. Wegst, news article of 14 December 2017: iStock.com/VanderWol, press release of 14 December 2017: iStock.com/XXXLarge
 
All further pictures: ©ZEW