Newsletter March 2019

Europe finally needs an insolvency system for heavily indebted euro countries. When it comes to mapping out the details of such a system, however, particular care shall be taken. It is essential to take precautions to ensure that banks are no longer allowed to lend without limits to single euro states. These are the central findings of a study conducted jointly by the ZEW – Leibniz Centre for European Economic Research, Mannheim, and the international research network EconPol Europe, which were presented during a jointly organised Lunch Debate Reforming the Eurozone: How to Handle Sovereign Debt? in Brussels today.

How do macroeconomics and innovation policy interact? This question was discussed by international scholars and policy-makers at the FRAME Final Policy Conference in London on 18 and 19 February 2019. During the conference, the project participants presented the key results and discussed the related policy conclusions of the EU Horizon 2020 project FRAME (Framework for the Analysis of Research and Adoption Activities and their Macroeconomic Effects) with different end users of the project’s research results.
 

On 19 March, German launched its auction of frequencies for the new mobile standard 5G. Professor Vitali Gretschko, head of the Research Group “Market Design” at the ZEW – Leibniz Centre for European Economic Research in Mannheim, comments on the auction.
 
The first rounds of the frequency auction allow us to draw initial conclusions about the bidders’ strategies. The bids placed so far suggest that the main conflict will occur between the new service provider Drillisch and the established network operators.

It’s official: the EU Commissioner for Competition, Margrethe Vestager, has decided to block a merger between Siemens and Alstom despite massive pressure from company executives and their political allies. Her decision should be applauded.
 
In 2017, the German conglomerate Siemens and the French rail transport multinational Alstom announced a plan to combine their train-manufacturing operations. Had the deal been approved, the new group would have had 62,000 employees and annual revenues of more than 15 billion euros.

The companies argued that the merger was needed as a counterweight to China’s state-owned CRRC, the largest supplier of rail transit equipment in the world.

The ZEW Research Department “Economics of Innovation and Industrial Dynamics” recently created the Junior Research Group “Competition and Innovation” that studies the law and economics of competition and innovation. Bernhard Ganglmair, who heads the group, talks with us about its research and sheds light on the potential applications.

The German Real Estate Finance Index (DIFI) by ZEW and JLL stagnates at a current reading of minus 9.7 in the first quarter of 2019. The index has remained in negative territory for almost two years now. The experts’ persistently pessimistic financing expectations reflect the subdued global economic situation as well as the economic and geopolitical tensions between the major powers. The uncertainties that come with a no-deal Brexit and its possible negative effects on German companies also contribute to this pessimism.

In March 2019, a new seminar series – the Mannheim Applied Seminar (MAS) – will be launched jointly by ZEW, the University of Mannheim and the Collaborative Research Center Transregio 224. On 6 March 2019, Georg Graetz from Uppsala University will give the first lecture in the series, analysing the effect of labour-replacing technologies on earnings and employment losses in occupations affected by technological change. The MAS series provides a platform for researchers to exchange ideas on current issues of applied economics.

The 2nd ZEW-FDZ user workshop will take place on 19 and 20 November 2019 at the ZEW – Leibniz Centre for European Economic Research in Mannheim. The ZEW Research Data Centre (ZEW-FDZ) provides external researchers with access to research data collected by ZEW. Since 1996, more than 380 external researchers have made use of ZEW survey data. The most frequently used data are the Mannheim Innovation Panel (MIP) – the German part of the Community Innovation Survey – and the IAB/ZEW Start-up Panel. Other available data sets can be found at the FDZ webpage. The workshop aims at stimulating the exchange among users and between users and the ZEW survey teams. It also addresses the particularities of ZEW (panel) surveys. The workshop will provide an opportunity to stimulate discussion on topics and questions for future surveys. ZEW would also like to invite all data users to put forward critical comments and suggestions for improving the ZEW survey data.

Obryan Poyser is a visiting researcher in ZEW’s Research Department “Digital Economics” from 1 February to 29 April 2019. He is a predoctoral researcher in the applied economics department at the Autonomous University of Barcelona (UAB) in Spain. His research focuses on digital economics, Bayesian methods, and machine learning. During his stay at ZEW, he spoke about the parallels between cryptocurrencies and financial markets in the ZEW Research Seminar on Cryptocurrency Markets.

Contrary to initial plans, Great Britain will not leave the European Union on 29 March 2019. The withdrawal agreement negotiated between the UK and the EU has already twice been rejected by the British Parliament. The House of Commons has now taken a new approach to test whether an alternative solution would gain majority support, while British Prime Minister Theresa May has offered to resign. Professor Achim Wambach, president of the ZEW – Leibniz Centre for European Economic Research comments on the current state of the Brexit process.

According to the most recent survey for March (6–21 March 2019), the expectations regarding the Chinese economy have decreased significantly by 11.5 points. The CEP Indicator, which is based on the China Economic Panel and reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is currently at minus 25.0 points (February 2019: minus 13.5 points). This marks the twelfth month in a row that the CEP indicator has been below its long-term average.

On 22 March 2019, the expert commission “Security in Transition” presented its final report within the framework of an economic conference in Stuttgart. The commission was established at the beginning of 2018 by the Center for Liberal Modernity with support from the Baden-Württemberg Stiftung. The commission consists of 14 representatives from the realms of science, business, trade unions and local politics, including Professor Achim Wambach, president of the ZEW – Leibniz Centre for European Economic Research in Mannheim.

The possible merger of Deutsche Bank and Commerzbank, which is currently the subject of intensive debate, is facing considerable resistance from the majority of financial market experts. This does, however, not mean that the creation of a large German bank is generally rejected. Slightly more than half of the experts are convinced that the German economy needs a large German bank with global reach. This is the result of a special question featured in the most recent ZEW Financial Market Survey conducted by the ZEW – Leibniz Centre for European Economic Research in Mannheim among 174 financial market experts in March 2019.

Financial market experts in Germany are rather cautious when it comes to a more active industrial policy by the government, with the majority of experts considering it to be ill-suited to achieve its objectives. This is the result of a survey conducted by the ZEW – Leibniz Centre for European Economic Research in Mannheim among 150 financial market experts as part of the ZEW Financial Market Survey in March 2019.

The ZEW Indicator of Economic Sentiment for Germany recorded a strong increase of 9.8 points in March 2019, with the corresponding indicator climbing to a level of minus 3.6 points. Although the indicator is still below the long-term average of 22.2 points, the expectations for the medium-term economic development are less pessimistic than they were a month or two ago. The assessment of the current economic situation in Germany decreased again in March, falling by 3.9 points to a reading of 11.1 points compared to the previous month.

The University of Mannheim and the ZEW – Leibniz Centre for European Economic Research receive more than one million euros of funding from the Baden-Württemberg Ministry of Science within the framework of the state governments’ digitalisation strategy “digital@bw”. The research grant will be used to launch a high-performance science data centre.

Thanks to the planned family policy reform “Starke-Familien-Gesetz”, which will bring about improvements regarding child supplements allocated to families, gainful employment will become more profitable for families with low incomes in Germany than before. As a consequence, employment figures – measured in full-time units – could rise by around 3,000 jobs. While there are currently around 90,000 households receiving child supplements, the reform could increase the number of eligible households by 80,000. In return, 18,000 households would no longer have to rely on long-term unemployment benefits.

These are the main findings of a study conducted jointly by the ZEW – Leibniz Centre for European Economic Research in Mannheim and the IZA – Institute of Labor Economics in Bonn on behalf of the German Federal Ministry for Economic Affairs and Energy.

The federal government’s current plan to introduce tax incentives for research and development (R&D) for companies in Germany is a step in the right direction – but it could be further improved. The legislation proposed by the German Federal Ministry of Finance for a new “Forschungszulagengesetz” (“Research Allowances Act”) is right to focus on small and medium-sized enterprises. However, the incentive suffers from various weaknesses that will significantly reduce its impact: a restriction to personnel expenses, a low cap for eligible expenses, high bureaucratic costs, and a four-year lifespan.

With targeted adjustments, the incentive would be much more effective in strengthening the attractiveness of Germany as a location for private-sector R&D.

A team of researchers from the ZEW – Leibniz Centre for European Economic Research in Mannheim, the University of Mannheim, École Polytechnique in Paris and Università Cattolica del Sacro Cuore in Milan surveyed members of the German Bundestag, Italian Camera dei Deputati and Senato della Repubblica as well as members of the French Assemblée Nationale and the Sénat. A total of 328 members of parliament (MPs) from three countries participated in the survey conducted in autumn 2018. The results of this survey, presented in Brussels today, demonstrate that French, Italian and German MPs are open to granting the EU more competencies in the fields of defense and immigration policy.

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

Francesco Bianchi, Diego Comin, Howard Kung, Thilo Kind and Alexander Matusche
Slow Recoveries Through Fiscal Austerity – New Insights in the Effects of Fiscal Austerity

Bernd Fitzenberger; Annette Hillerich-Sigg; Maresa Sprietsma
Different Counselors, Many Options: Career Guidance and Career Plans in Secondary Schools

Christian Hundt; Linus Holtermann; Jonas Steeger; Johannes Bersch
Cluster Externalities, Firm Capabilities, and the Recessionary Shock: How the Macro-to-Micro-Transition Shapes Firm Performance During Stable Times and Times of Crisis

Marit Hinnosaar; Toomas Hinnosaar; Michael Kummer; Olga Slivkó
Externalities in Knowledge Production: Evidence from a Randomized Field Experiment

Diego Comin; Georg Licht; Maikel Pellens; Torben Schubert
Do Companies Benefit from Public Research Organizations? The Impact of the Fraunhofer Society in Germany

Christoph Spengel, Frank Schmidt, Jost Henrich Heckemeyer, Katharina Nicolay, Alexandra Bartholmeß, Christopher Ludwig, Daniela Steinbrenner, Rainer Bräutigam, Peter Buchmann, Theresa Bührle, Elisa Casi, Verena Dutt, Leonie Fischer, Christoph Harendt, Raphael Müller, Thomas Schwab, Barbara Stage, Heiko Vay and Ann-Catherin Werner
Effective Tax Levels Using the Devereux/Griffith Methodology – Update 2018

Martin Lange, Friedhelm Pfeiffer, Aaron Scherf and Katrin Sommerfeld
Integrationsfortschritte: Ergebnisse der zweiten Reallabor-Befragung von Asylsuchenden (Progress in Integration: Results of the Second Real-World Laboratory Survey of Asylum Seekers)

Wolfgang Briglauer, Jörg Ohnemus and Steffen Viete
Mehr als Konnektivität – digitale Chancen für Telcos (More Than Connectivity – Digital Opportunities for Telcos)

Holger Bonin, Florian Buhlmann, Eric Sommer and Holger Stichnoth
Mikrosimulation von Reformszenarien zur finanziellen Entlastung von Geringverdienern (Microsimulation of Reform Scenarios for the Financial Relief of Low-Income Earners)

Growth Welfare Innovation and Productivity

Location of the event: University of Cologne

Speaker: Assistant Professor Xavier Jaravel, PhD (London School of Economics)
Location of the event: ZEW, Mannheim

Speaker: Prof. Dr. Jan Marcus (University of Hamburg)
Location of the event: ZEW, Mannheim

Speaker: Mark C. Thurber, PhD (Stanford University, United States)
Location of the event: ZEW, Mannheim

Speaker: Mirko Paschke (Federal Ministry of Transport and Digital Infrastructure)
Location of the event: University of Mannheim

Speaker: Prof. Anthony Strittmatter, PhD (University St. Gallen)
Location of the event: ZEW, Mannheim

Speaker: Dr. Wolfgang Habla (ZEW)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: Ulcinj, Montenegro

Doctoral Researchers (100%) for the Research Department “Environmental and Resource Economics, Environmental Management”

Researcher (Doctoral Student, 100%) for the Junior Research Group “Competition and Innovation“

Picture Credits: news article of 28 March 2019: iStock.com/ansonsaw, press release of 21 March 2019: iStock.com/jpique, press release of 21 March 2019: PantherMedia/zhuzhu, press release of 12 March 2019: Daniela Haupt, press release of 11 March 2019: iStock.com/wundervisuals, news article of 7 March 2019: JLL and ZEW, press release of 6 March 2019: iStock.com/shironosov, press release of 27 February 2019: iStock.com/MichaelUtech
 
All further pictures: ©ZEW