Newsletter April 2018

The current debate over the reform of the European Union has come to a head. Demands for the creation of a European Monetary Fund (EMF) or the appointment of a finance minister for the Eurozone would require the EU Member States to relinquish further sovereignty rights. How can these reform plans be successfully implemented and what will the Eurozone look like in the future? These questions are the focus of the upcoming ZEW Lunch Debate “Reforming the Eurozone: Prospects and Challenges” on 2 May 2018 at the Representation of the State of Baden-Württemberg to the EU in Brussels.

The debate, organised by the Centre for European Economic Research (ZEW) in cooperation with the research network EconPol Europe, will bring together experts from the worlds of politics and research to discuss this pressing issue.

According to the OECD’s most recent healthcare report, Germany’s health system is merely average – not in terms of healthcare expenditure, which, like the number of doctors and hospital beds per capita, is above the OECD average, but in terms of the quality of provision. Heart attack mortality rates and obstetric injury figures, for example, are above average in Germany.

Do driving bans for diesel cars make economic sense? Following a ruling from Germany’s Federal Constitutional Court, cities in Germany can impose bans on diesel vehicles in order to comply with EU-wide limits on nitrogen dioxide levels. The possibility of introducing such a ban is currently being discussed in a number of cities, including Stuttgart, Munich, Hamburg and Düsseldorf. Diesel car owners affected by the ban may also be faced with getting their cars modified and installing new software updates. ZEW environmental economist Dr. Martin Kesternich discusses the most practical measures, from an economic point of view, for reducing air pollution and traffic, and for implementing CO2 avoidance measures in the transport sector in a cost-efficient manner.

To what extent does innovation impact economic growth? Can public research foster innovation through the diffusion of knowledge? And how can policymakers encourage sustainable innovation and growth? These are some of the questions discussed by researchers and politicians from across Europe attending the FRAME Mid-Term Conference held at ZEW on 19–20 March 2018. The FRAME Project is sponsored by the European Commission within the framework of the research and innovation programme Horizon 2020, Grant No. 727073.

A small stretch of land between the Californian cities of San Francisco and San Jose has been setting the pace for digital transformation around the globe. Often referred to as Silicon Valley, this small area is home to the headquarters of the world’s leading tech firms and start-ups and around a quarter of all venture capital worldwide. The question is, what can Germany learn from the example of Silicon Valley and how can we use this knowledge and the resources we already possess to avoid falling (further) behind in this technological race to the top?

Finding new strategies and digital solutions for German businesses was the focus of an event organised jointly by the Centre for European Economic Research (ZEW), Mannheim, and the Baden-Württemberg Ministry for Economic Affairs, Labour and Housing held at the Baden-Württembergische (BW) Bank in Stuttgart.

This year, the human resources department at ZEW once again attended the career fair at the University of Mannheim, providing information on opportunities to embark on a career in research and at ZEW, for example, through internships, student jobs or completing a doctorate at the institute. Students had the opportunity to ask members of the ZEW human resources team their career-related questions on 17 April 2018 between 10 a.m. and 4 p.m. at the Ehrenhof in Mannheim.

For the sixth year in a row, the Volksbank Weinheim Stiftung (Volksbank Weinheim Foundation) and ZEW are offering two research awards with the aim of supporting up-and-coming researchers primarily in the Rhine-Neckar region. The prizes will be awarded to the best doctoral dissertation (prize money: 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 2018.

By signing the WIN Charter of the State of Baden-Württemberg, ZEW makes a clear commitment to economic, ecological and social responsibility. The WIN Charter (short for: Wirtschaftsinitiative Nachhaltigkeit, Sustainable Business Practices) was developed as part of Baden-Württemberg’s sustainability strategy and consists of twelve guiding principles. These principles cover several aspects of sustainability (economy, ecology and social affairs), set out common basic values and provide incentives for their implementation at various levels.

Over the course of this year, ZEW will be particularly committed to the WIN principles of human rights and employee rights, employee welfare, resources as well as energy and emissions.

Right up until the end of the German coalition negotiations between the CDU, CSU and SPD, one of the biggest points of contention was the issue of fixed-term employment contracts without material reason. There are currently thousands of workers in Germany working on fixed-term contracts. ZEW labour market researcher Michael F. Maier explains exactly what the coalition parties agreed upon regarding fixed contracts and how the new regulations would affect both workers and employers.

The Centre for European Economic Research (ZEW) and the University of Mannheim are pleased to announce a joint workshop on families in macroeconomics from 18 to 20 October 2018. The aim of the workshop is to bring together micro and macro economists working on the economics of the family. Papers on topics relevant to developed as well as developing countries are welcome. Researchers are invited to submit theoretical, empirical, and quantitative contributions on the subject; the submission of field experiments is encouraged. Please send your full paper or extended abstract to memarzadeh.nahid@gmail.com no later than 15 May 2018.

The Centre for European Economic Research (ZEW) is pleased to announce the Leibniz Network's tenth interdisciplinary conference on Real Estate Markets and Capital Markets (ReCapNet) in Mannheim on 8 and 9 November 2018. The conference is open to all researchers interested in the interactions between real estate markets and capital markets. We welcome contributions from the perspectives of real estate finance and economics concentrating on issues related to price formation, liquidity, and transparency in real estate markets. A list of further potential topics is included in the call for papers. Submissions on these and related areas at the intersection of real estate finance and real estate economics are encouraged. Please submit full papers in PDF format to recapnet@zew.de no later than 15 July 2018.

Professor Maarten Goos was a visiting researcher in ZEW’s Research Department “Labour Markets, Human Resources and Social Policy” on 23 and 24 April 2018. He is Professor of Economics and Institutions at the Utrecht University School of Economics in the Netherlands. His research focuses on labour markets including technological progress, labour market intermediation, inequality, and institutions. During his visit, he worked with ZEW researchers on a joint research project on the technological change and the future of work in the EU.

Wytse Joosten was a visiting researcher in ZEW’s Research Department “Economics of Innovation and Industrial Dynamics” from 10 to 13 April 2018. She is a doctoral researcher at the Faculty of Economics and Business at KU Leuven, Belgium. Her research focuses on the economics of education and science. During her visit, she worked with ZEW researchers on identifying the careers of Finnish scientist based on publication data.

Elena Prodi is a visiting researcher in ZEW’s Research Department “Economics of Innovation and Industrial Dynamics” from 24 January to 13 July 2018. She is a PhD candidate at the Department of Human and Social Sciences at the University of Bergamo, Italy, and Junior Research Fellow at the non-governmental organisation ADAPT (Association for International and Comparative Studies in Labour and Industrial Relations). Her research interests lie in the fields of human capital formation and labour market relations. During her stay at ZEW, Elena Prodi will focus on public policies supporting the collaboration and transfer knowledge between research and industry in Germany, in comparison to Italy.

The number of mergers and acquisitions (M&As) involving German firms continues to drop in 2018. Last year already saw unusually weak M&A activities. Only in the second half of 2017 did they stabilise on a moderate level. This development 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. The index is calculated by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.

The European Commission is planning to restructure the current European Stability Mechanism (ESM) into a European Monetary Fund (EMF). These plans have triggered a debate within Germany’s “Grand Coalition” over what monitoring rights the German parliament – the Bundestag – should have regarding this new organisation. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW), Mannheim, shares his thoughts on the plans.

The ZEW Indicator of Economic Sentiment for Germany once again experienced a sharp decline in April 2018, dropping by 13.3 points compared to March and 26.0 points compared to February. The indicator currently stands at minus 8.2 points, falling far below the long-term average of 23.5 points. The assessment of the current economic situation in Germany decreased by 2.8 points, with the corresponding indicator currently standing at 87.9 points.

In a recent ruling on the standard rateable valuation for calculating property tax, the German Federal Constitutional Court determined that the current procedure for tax collection based on outdated assessment values for the more than 35 million real estate properties in Germany is in violation of the principle of equal treatment in the German constitution. Dr. Oliver Lerbs, head of the Research Department “International Finance and Financial Management” at the Centre for European Economic Research (ZEW), Mannheim, comments on the court’s ruling.

In the April survey (20.3.–05.04.2018), expectations for the Chinese economy fell once again, albeit slightly. The CEP indicator has dropped 2.4 points since last month, bringing it to a current level of minus 1.0 points (March 2018: 1.4 points). The current results of the CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, show that economic conditions are expected to remain largely unchanged over the current year.

Medium-sized companies, also known as “midrange companies”, in Germany are at a significant disadvantage when it comes to receiving research funding from the federal government and the EU. As a result, many good ideas for a new product or a process innovation developed by these companies are left on the shelf and not pursued. This is due, firstly, to the fact that businesses do not have access to research funding and, secondly, to the fact that companies have been unable to raise sufficient financial resources from internal or external sources via capital markets. This has serious consequences.

Not only are opportunities to innovate and to compete with international companies being wasted, new and innovative jobs are being created in other countries and not in Germany. It is therefore time to rethink current approaches to R&D and place stronger emphasis on tax incentives for research activities, with a particular focus also on midrange companies. This is the result of a study conducted by the Centre for European Economic Research (ZEW), Mannheim, on behalf of the Mechanical Engineering Industry Association (VDMA).

Digital transformation is creating more jobs than it is destroying, but still poses many challenges for establishments and workers alike. To ensure that the German economy remains competitive in this arena, the government needs to take action. This is the main finding of a project focusing on the German labour market entitled “Digitalisation and the Future of Work”, which was carried out by the Centre for European Economic Research (ZEW), Mannheim, and funded by the German Federal Ministry of Education and Research.

Policy measures such as diesel car bans, the phasing out of cars using internal combustion engines or free public transport have been the focus of recent debates on transport policy. These proposals are, however, not advisable from an economic point of view. If cities want to tackle transport-related problems such as air pollution and congestion, they should instead consider introducing a road toll, or congestion charge, that is linked to traffic volume and local pollution levels. At the same time, policy-makers should also place a stronger focus on the EU emissions trading scheme as a means of reducing CO2 emissions in the transport sector in a cost-effective way.

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

Wolfgang Briglauer; Klaus Peter Gugler
Go for Gigabit? First Evidence on Economic Benefits of (Ultra-)Fast Broadband Technologies in Europe

Verena Dutt; Christopher A. Ludwig; Katharina Nicolay; Heiko Vay; Johannes Voget
Increasing Tax Transparency: Investor Reactions to the Country-by-Country Reporting Requirement for EU Financial Institutions

Dirk Czarnitzki; Kristof van Criekingen
New Evidence on Determinants of IP Litigation: A Market-Based Approach

Andreas Löschel; Jiansuo Pei; Bodo Sturm; Ran Wang; Wolfgang Buchholz; Zhongxiu Zhao
The Demand for Global and Local Environmental Protection – Experimental Evidence from Climate Change Mitigation in Beijing

Daniel Harenberg; Alexander Ludwig
Idiosyncratic Risk, Aggregate Risk, and the Welfare Effects of Social Security

Nils Grevenbrock; Max Groneck; Alexander Ludwig; Alexander Zimper
Cognition, Optimism and the Formation of Age-Dependent Survival Beliefs

Dirk Krueger; Alexander Ludwig
Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk

Steffen Viete; Daniel Erdsiek
Trust-Based Work Time and the Productivity Effects of Mobile Information Technologies in the Workplace

Johannes Bersch, Josefine Diekhof, Bastian Krieger, Georg Licht and Simona Wagner
Abnehmendes Produktivitätswachstum – zunehmende Produktivitätsunterschiede (Decreasing Productivity Growth – Increasing Productivity Gaps)

Melanie Arntz, Terry Gregory and Ulrich Zierahn
Digitalisierung und die Zukunft der Arbeit: Makroökonomische Auswirkungen auf Beschäftigung, Arbeitslosigkeit und Löhne von morgen (Digitalisation and the Future of Work: Macroeconomic Effects on Future Employment, Unemployment and Wages)

Bettina Peters, Martin Hud, Christian Rammer and Georg Licht
Zur Notwendigkeit einer steuerlichen FuE-Förderung auch für „Midrange Companies“ (On the Need for Tax-Based R&D Funding that Includes Mid-Range Companies)

Effects of Fossil Fuel Fired Power Production on Local Air Pollution

Speaker: Prof. Niels Johannesen, PhD (University of Copenhagen)
Location of the event: ZEW, Mannheim

Speaker: Florence Jaumotte (International Monetary Fund (IMF), Washington, DC)
Location of the event: ZEW, Mannheim

Speaker: Dr. Katharina Schüssler (Ludwig Maximilian University, Munich)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Prof. Francesco Fasani, PhD (Queen Mary University of London)
Location of the event: ZEW, Mannheim

Location of the event: TU Braunschweig

Speaker: Prof. Murat C. Mungan, PhD (George Mason University, Arlington)
Location of the event: University of Mannheim

Location of the event: ZEW, Mannheim

Location of the event: Ulcinj, Montenegro

Speaker: Prof. Peter Kuhn, PhD (University of California, Santa Barbara (UCSB))
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speaker: Byron Lutz, PhD (Board of Governors of the Federal Reserve System, Washington, DC)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speakers: Prof. Dr. Friedrich Heinemann (ZEW), Paulina Dejmek-Hack (European Commission, Economic Advisor to Jean-Claude Juncker), Hans Vijlbrief (Council of the European Union, President of the Eurogroup Working Group), Prof. Roberto Tamborini, PhD (University of Trento)
Moderation: Silke Wettach (Wirtschaftswoche)
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Brussels

Speaker: Dr. Jens Weidmann (President of the Deutsche Bundesbank)
Location of the event: ZEW, Mannheim

Picture Credits: news article of 25 April 2018: iStock.com/VanderWolf-Images, press release of 10 April 2018: iStock.com/martin-dm, press release of 6 April 2018: @iStocphoto/Wavebreakmedia, news article of 5 April 2018: Martin Stollberg, press release of 4 April 2018: @iStockphoto/Just_Super, press release of 29 March 2018: iStockphoto.com/Alija
 
All further pictures: ©ZEW