Newsletter July 2018

On 17 July 2018, high school students from the Eschbach-Gymnasium in Stuttgart-Freiberg visited the Centre for European Economic Research (ZEW), Mannheim, to learn more about – and become actively involved in shaping – the linkages between economy theory and practical applications. The student visit did not only give the economics course of the 11th grade a chance to discuss economic issues with ZEW researchers; experiments and a simulation game also allowed them to gain fascinating, practical insights into the work conducted at the institute.

From 23 June to 13 July 2018, ZEW employees took part in the campaign “City Cycling – Cycling for a Better Climate” organised by the city of Mannheim in collaboration with the state of Baden-Württemberg. The goal of the initiative, which is carried out on an annual basis, is to promote climate protection whilst encouraging people to take up cycling in a fun way. In the past three weeks, those participating in the campaign have tried to clock up as many CO₂-free kilometres as possible in their daily commutes or other journeys. Over the past weeks, the ZEW team was able to save around 770 kilograms of CO₂, contributing to a more sustainable future in an active way.

Science is exciting and fun – this was the conclusion drawn by the business course of the 11th grade of the Gymnasium in Mengen after their visit to ZEW on 18 July 2018. The school students seized the opportunity to get first-hand insights into the work of an economic research institute.

The warning from the European Court of Auditors that Germany risks missing out on the rapid expansion of ultra-fast internet if it sticks to its current copper wire based expansion strategy is alarming. The last national government couldn’t even meet its broadband goal of providing every household with a minimum internet speed of 50 Mbit/s by 2018. Therefore, the latest promise of a nationwide update to gigabit networks capable of speeds of 1,000 Mbit/s by 2025 seems far off on the horizon. Germany currently comes in fifth from the bottom in Europe when it comes to the share of households with a fibre-optic internet connection. There are, however, a number of ways for Germany to transform into a gigabit society.

The development and application of artificial intelligence (AI) are highly relevant current issues that affect the economy, science, politics and society in equal measure. The Centre for European Economic Research (ZEW), Mannheim, made its own contribution to the debate surrounding the opportunities and risks associated with this new technology with an event held on Thursday, 12 July 2018, as part of the series “First-Hand Information on Economic Policy”. Claudia Nemat, executive board member at Deutsche Telekom responsible for technology and innovation, was invited to deliver a speech on “Artificial Intelligence: A Wake-up Call for Europe” and provided the 130 guests in attendance fascinating, practical insight into the topic from the perspective of the biggest telecommunications firm in Europe.

On 18 and 19 June 2018, ZEW, together with the University of Mannheim’s Institute for SME Research (Institut für Mittelstandsforschung, ifm) and the Mannheim Centre for Competition and Innovation (MaCCI) hosted the fourth international conference on the “Dynamics of Entrepreneurship” (CoDE). Over the course of two conference days, more than 80 researchers from Europe, the United States and Japan discussed recent empirical and theoretical studies in the fields of entrepreneurship and business dynamics.

Today the chairman of the German Monopolies Commission, ZEW President Professor Achim Wambach, together with his colleagues, presented the Biennial Report 2018 of the Monopolies Commission to the Federal Minister for Economic Affairs and Energy, Peter Altmaier. The report contains recommendations for policymakers to adjust the legal framework for price algorithms, the media sector and the supply of medicines in response to digital change.

How can the admission and allocation process for nursery school places be designed in an efficient way? This and many other questions related to market design in Europe will be addressed at the 15th workshop on “European Matching Practices” hosted by the Centre for European Economic Research (ZEW) in Mannheim on 12 and 13 October 2018. The event will bring together researchers working on allocation and matching problems in education or labour markets, or other related markets. The workshop aims to provide a platform for the exchange of new research approaches (theory, experiments, analysis of field data, policy-oriented market design) and expertise on the functioning of matching markets in Europe. Interested researchers are invited to submit a paper to matching2018@zew.de by 31 August 2018.

As part of the International Climate Protection Fellowship offered by the Alexander von Humboldt Foundation, Dr. Jie Wu from the Shanghai University of Finance and Economics in China is conducting a research visit at ZEW from 26 March 2018 until 28 February 2019. During her time in the ZEW Research Department “Environmental and Resource Economics, Environmental Management”, she will be conducting research into how China can successfully meet its climate goals.

As expected, the European Central Bank (ECB) has not made any changes to its interest rate policy in its latest decision. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW) in Mannheim, explains the ECB's decision.

As of July 2018, researchers using German official statistics data for their research projects are able to access these data at the Centre for European Economic Research (ZEW) in Mannheim. The Research Data Centre (FDZ) of the State Statistical Office of Baden-Württemberg has established a workplace for visiting researchers that can be used to analyse official data for the purpose of scientific research.

After displaying a slightly weaker performance both in 2017 and the first half of 2018, the ZEW-ZEPHYR M&A Volume per Deal Index climbed to more than 130 points in June 2018 – reaching the highest index value since October 2016. The ZEW-ZEPHYR M&A Volume per Deal Index reflects the development of mergers and acquisitions completed worldwide. This development is largely driven by a few mega deals. While the number of M&A transactions completed worldwide has been experiencing a downward trend for quite some time and amounted to a moderate 561 transactions in June 2018, the volume per deal has increased significantly.

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.

Both German and French agricultural ministers have spoken out against reducing EU agricultural spending and called for the agricultural budget to be maintained at its current level. In a joint study conducted by the Centre for European Economic Research (ZEW), Mannheim, and the Bertelsmann Stiftung, researchers have found that the EU’s common agricultural policy (CAP) provides only limited added value to the EU, and recommend a comprehensive redistribution of funds in favour of other policy areas. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporation Taxation and Public Finance” comments on the Franco-German policy statement.

In the recent survey for July (27/06/2018–12/07/2018), economic expectations for China once again dropped considerably to a new level of minus 10.9 points (June 2018: 2.9 points). This represents the fifth consecutive decrease in the CEP Indicator, which is currently well below the long-term average of 4.5 points. The CEP Indicator reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months.

The business year 2017 saw a critical decision being made with respect to the future trajectory of the Centre for European Economic Research (ZEW) in Mannheim. The institute may now embark on a strategic expansion into a competence centre for market and institutional design. “To get approval for this new plan was a considerable achievement of the entire institute. Both the Leibniz Association and the German Council of Science and Humanities have voiced their support for our proposal to expand ZEW’s research agenda from 2019 onwards to include the study of the design of effective markets and institutions,” explains ZEW President Professor Achim Wambach.

After long negotiations, the German government has agreed to introduce the so-called Baukindergeld, a subsidy granted per child to help families to build or buy homes. The government subsidy programme to finance residential construction and real estate purchases will apply retroactively from January 2018 and aims to make it easier for young families to acquire residential property. Dr. Carolin Schmidt, real estate expert and researcher in the ZEW Research Department “International Finance and Financial Management” sees alternatives to ease the burden on families.
 

Today, the case of the Public Sector Purchase Programme (PSPP) of the European Central Bank (ECB) is being brought before the European Court of Justice. The asset purchase programme of the ECB is primarily being accused of violating the ban on monetary financing. In a short expertise, Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance“ at the Centre for European Economic Research (ZEW) in Mannheim, has commented on this issue.

The ZEW Indicator of Economic Sentiment for Germany recorded a decrease of 8.6 points in July 2018 and now stands at minus 24.7 points. This is the lowest reading since August 2012 and well below the long-term average of 23.2 points. Since the beginning of the year, expectations have sunk by a considerable 45.1 points. The assessment of the current economic situation in Germany decreased by 8.2 points, leaving the corresponding indicator at 72.4 points.

Though the recent wave of migrants arriving in Germany has led to increased support for far-right parties across the country, direct contact between local residents and refugees in municipalities with particularly high numbers of newly arrived migrants leads to fewer votes for right-wing parties at the local level. A joint study by the Centre for European Economic Research (ZEW) in Mannheim and the University of Strathclyde has been investigating the short-term effects of the recent wave of migration on issues such as voting behaviour in Germany.

County mergers, in which two or more county administrations are combined into a single entity, do not have a notable effect on cost savings or staff reductions in local administrations. Instead, they decrease election turnout in amalgamated counties. At the same time, the share of the vote won by right-wing populist parties has increased considerably in merged counties. This is the main finding of a study carried out by the Centre for European Economic Research (ZEW), Mannheim.

The Centre for European Economic Research (ZEW) in Mannheim recently presented the Heinz König Young Scholar Award for the 20th time. This year the research award went to Michael Stiefel from the University of Zurich. The doctoral student was awarded the prize by ZEW for his excellent investigation into the role of the European Central Bank (ECB) in instilling confidence for government bonds of European countries such as Spain and Italy during the government debt crisis of 2012. Michael Stiefel’s paper constitutes a significant contribution to research on confidence building on the European financial market in times of crisis.

In the ongoing political debate surrounding Germany’s policy regarding refugees and asylum, the current focus is on whether Germany can achieve its goals in this area without the support of other nations. Professor Friedrich Heinemann, head of the Research Department "Corporate Taxation and Public Finance" at the Centre for European Economic Research (ZEW), offers his view on the matter.

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Maximilian J. Blömer; Nicole Gürtzgen; Laura Pohlan; Holger Stichnoth; Gerard J. van den Berg
Unemployment Effects of the German Minimum Wage in an Equilibrium Job Search Model

Sebastian Blesse; Felix Roesel
Merging County Administrations – Cross-National Evidence of Fiscal and Political Effects

Josefine Diekhof, Jan Kinne, Friedmann Koll, Jan-Philipp Kramer, Marion Neumann, Christian Rammer, Melanie Reisch and Hinrich Schwarze
Regionale Innovationssysteme in Baden-Württemberg – Bestandsaufnahme und Schlussfolgerungen (Regional Innovation Systems in Baden-Württemberg – Current Standing and Implications)

Silke Stahl-Rolf, Luciana Hutapea, Karsten Reuß, Sidonia von Proff, Josefine Diekhof, Jürgen Egeln, Sandra Gottschalk and Christian Rammer
Sächsischer Technologiebericht 2018 (2018 Technology Report for Saxony)

Irene Bertschek, Wolfgang Briglauer, Daniel Erdsiek, Reinhold Kesler and Thomas Niebel
Metastudie zur Bestandsaufnahme des Digitalen Ökosystems NRW (Meta Study on the Opportunities and Challenges of the Digital Eco-System of the State of North Rhine-Westphalia)

Tobias Weber, Irene Bertschek, Jörg Ohnemus and Martin Ebert
Monitoring-Report Wirtschaft DIGITAL 2018 (Monitoring Report DIGITAL Economy 2018)

Katharina Nicolay, Irene Bertschek, Christoph Spengel, Ulrich Laitenberger, Thomas Niebel, Peter Buchmann and Ann-Catherin Werner
Struktur und Volumen des Marktes von Internetdienstleistungen mit Fokus auf Drittlandsunternehmen (Stucture and Volume of the Market for Internet Services with a Focus on Third-Country Companies)

Christian Rammer and Markus Trunschke
Forschung und Innovation: Die Schweiz im Vergleich zu anderen Innovationsregionen (Research and Innovation: Switzerland in Comparison to Other Innovative Regions)

Market Design by Public Authorities

Taxation in the Era of Digital Transformation

Location of the event: ZEW, Mannheim

Location of the event: University of International Business and Economics, Beijing

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

Picture Credits: news article of 13 July 2018: Erich Dichiser, press release of 9 July 2018: iStock.com/querbeet, press release of 4 July 2018: iStock.com/Bestgreenscreen, news article of 3 July 2018: Monopolies Commission, press release of 2 July 2018: iStock.com/csakisti
 
All further pictures: ©ZEW