Newsletter May 2019

On 2 and 3 May 2019, the ZEW – Leibniz Centre for European Economic Research and the Collaborative Research Center SFB 884 “Political Economy of Reforms” jointly organised the annual ZEW Public Finance Conference. The focus of this year’s conference was on the political economy of European (dis)integration. Approximately 100 participants attended the two-day event in Mannheim to discuss this and other topics of public finance and political economy.

To judge by recent discussions about European industrial policy, Europe has been slow to adopt new digital technologies and is facing terrifying competition from China. Christian Rammer, the deputy head of the “Economics of Innovation and Industrial Dynamics” Research Department at ZEW, tells us whether Europe’s industrial sector is in as bad shape as conventional wisdom suggests and what the EU can do better in the future.

How can Artificial Intelligence (AI) be measured? What possibilities are there to prosecute patent infringements? How can the transfer of knowledge between science and industry be improved? These were some of the questions discussed at the eighth ZEW/MaCCI Conference on the Economics of Innovation and Patenting. The internationally renowned conference was jointly organised by ZEW and the Mannheim Centre for Competition and Innovation (MaCCI) on 16 and 17 May 2019.

What does the current state of the world economy look like from a European perspective? What is the relationship between China, the USA and Europe? What challenges does digitalisation pose for the social market economy? These and other economic policy questions are the subject of various lectures by ZEW President Professor Achim Wambach during his business and lecture tour through the People’s Republic of China from 23 May to 3 June 2019, which includes stops in Shanghai, Beijing and Jinan. The aim of the tour is, among other things, to strengthen ZEW’s relations with Chinese partners through lectures and discussions with representatives from the realms of politics, business and science.

On 21 May 2019, human resources managers from SMEs and large corporations in Mannheim and the surrounding area met to exchange experiences on Labour 4.0. The meeting organised by the German Association for People Management (DGFP e.V.) offered guests the opportunity to examine and discuss this widely debated issue on the basis of ZEW research findings.

The climate is changing and so is the mobility of people. Our infrastructure and transport networks are already congested, causing increasing levels of emissions that pollute the air in cities. Trends like alternative drive systems, car sharing and autonomous driving signal that a change in mobility is taking place. How can we achieve this change in such a way that we can move in a climate-friendly manner in the future? This was the central question of the panel debate on “Mobility of the Future – Shaping Change” jointly organised by the ZEW – Leibniz Centre for European Economic Research and the Baden-Württemberg Ministry of Transport on 14 May 2019 at BW Bank in Stuttgart.

Professor Van Anh Vuong was a visiting researcher in ZEW’s Research Department “Economics of Innovation and Industrial Dynamics” from 13 to 20 May 2019. She is assistant professor of organisation and strategy at the School of Business and Economics at Maastricht University, Netherlands. Her research focuses on empirical industrial organisation, innovation economics and applied microeconomics. During her visit, she worked with ZEW researcher Professor Bettina Peters and ZEW Research Associate Professor Mark Roberts (Penn State University and NBER, USA) on estimating long-term benefits of investments in training as well as in research and development in service firms. Furthermore, she acted as a discussant at the 8th ZEW/MaCCI Conference on the Economics of Innovation and Patenting.

Imke Reimers was a visiting researcher in the Junior Research Group “Competition and Innovation” from 6 to 17 May 2019. She is an assistant professor of economics at the Northeastern University in Boston, USA. Her research focuses on industrial organization and applied econometrics. Her current work concentrates mainly on how intellectual property policy and new technologies affect supply, demand, and platforms in information and digital industries. During her visit, she worked with ZEW researcher Dr. Bernhard Ganglmair on topics relating to the diffusion of knowledge and cumulative innovation through patents and trade secrets. Furthermore, she gave a presentation on the digital challenges for the book market and the Google Books project in the ZEW Research Seminar Digitization and the Demand for Physical Works: Evidence from the Google Books Project.

After the European elections, the European Council must propose a candidate for president of the Commission to the European Parliament. With the end of Mario Draghi’s term as president of the European Central Bank (ECB), another important position in the EU is to be filled in the following months. With Manfred Weber and Jens Weidmann, there are promising German candidates for both offices. However, it is deemed impossible that both positions will be filled by Germans. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance”, comments on these pending decisions following the European elections.

According to the most recent survey for May (2–16 May 2019), the economic outlook for China has continued to improve. The CEP Indicator, which 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 1.7 points (April 2019: minus 11.9 points). For the first time since March 2018, the CEP indicator has thus returned to positive territory and almost lies level with its long-term average of 1.8 points.

Against the backdrop of the current transport policy debate, researchers at ZEW emphasise that the problem of traffic-related issues in city centres, such as air pollution and traffic jams, can be solved efficiently by means of congestion charging. They thus support an initiative of the Board of Academic Advisors at the Federal Ministry for Economic Affairs and Energy, which advocates that market-oriented solutions be pursued in transport policy.

The MS Wissenschaft will hoist its anchor in Berlin on 16 May 2019. In the Science Year 2019, the exhibition ship will travel the world of artificial intelligence. The interactive touch-screen exhibit “Wie Künstliche Intelligenz Sprache und die Welt verstehen lernt” (“How Artificial Intelligence Learns to Understand Language and the World”) of the ZEW is on board the exhibition ship this year, and will travel 27 German cities until October 2019 before continuing its journey in Austria.

The ZEW Indicator of Economic Sentiment for Germany records a decrease of 5.2 points in May 2019, and now stands at minus 2.1 points. The indicator’s long-term average is 22.1 points. Over the same period, the assessment of the economic situation in Germany has improved by 2.7 points, with the corresponding indicator climbing to a current reading of 8.2 points. The development of production and exports in Germany as well as Eurostat’s most recent flash estimate of GDP growth in the euro area in the first quarter of 2019 give rise to the hope that the German economy, too, has grown more strongly than expected in the first quarter.

Trade tariffs, as they are currently being debated in parts of politics and even introduced, put a severe strain on export-oriented companies. Not only do they lead to price increases for consumers, but they also reduce the returns from research and development (R&D) for exporting companies. This entails the risk that exporters in particular will be deterred from making important investments in R&D in the future. This is all the more serious as companies selling their products on international markets invest significantly more in R&D than companies operating only on their home market. These are the findings of a study conducted by ZEW.

ZEW is part of a new research alliance aiming to conduct interdisciplinary research into the influence of digitalisation on individuals and society. The Baden-Württemberg Ministry of Science, Research and the Arts will be funding the “Society in Digital Transition” project with around 2.2 million euros for a period of three years.
 

The German Federal Ministry of Finance’s Working Party on Tax Revenue Estimates has made a downward adjustment of its forecasts for federal, state and municipal tax revenues in Germany up until the year 2023. Professor Friedrich Heinemann, head of the “Corporate Taxation and Public Finance” Research Department at ZEW in Mannheim, comments on this matter.

On the occasion of the upcoming European elections, ZEW has issued a position paper containing priorities to be addressed by the new European Parliament. The position paper is based on recent ZEW research findings and identifies critical points that need to be tackled, including the restructuring of the EU budget towards creating European added value, changes in agricultural and cohesion policy as well as the implementation of a viable insolvency procedure for highly indebted eurozone countries.

After having already made a rather cautious start to 2019, companies in the German information economy have found that the economic situation has since cooled further in the first quarter of the year. This assessment is based on the latest reading of the ZEW Economic Sentiment Indicator for the Information Economy, which saw a decline from 66.4 points in the last quarter of 2018 to a reading of 64.0 points in the first quarter of 2019. The ZEW Economic Sentiment Indicator is the result of a survey among companies in the German information economy, conducted by ZEW in March 2019.

Working from home affects childless employees and parents very differently. Childless employees who work from home work on average one extra hour per week of unpaid overtime, while reporting higher job satisfaction. For parents, on the other hand, it is less the number of overtime hours than the contractual working hours that increase when taking up working from home. Thus, on average, mothers work 3.5 hours longer per week and fathers 0.4 hours per week. What is more, the increase in working hours is linked to a 16 per cent rise in earnings for mothers.

For fathers, the wage increase is about two per cent. These are the findings of a study conducted by ZEW in Mannheim.

The number of mergers and acquisitions (M&A) involving German firms has fallen slightly since the end of last year. This means that the weak M&A activity already observed in the fourth quarter of 2018 has continued to decline in 2019. M&A activity was particularly weak in November 2018, which saw the lowest monthly level for two years and the second-lowest volume in six years; only November 2016 had seen even fewer mergers and acquisitions. However, December 2018 and the beginning of 2019 were not much busier either and failed to compensate for the lacklustre autumn.

Professor Irene Bertschek, head of the Research Department “Digital Economy” at ZEW, has been appointed as a new member of the Commission of Experts for Research and Innovation (EFI) as of 1 May 2019. EFI’s task is to provide scientific policy advice to the federal government. “The appointment of Irene Bertschek is a testament to her great work and an accolade for ZEW,” says ZEW President Professor Achim Wambach.

“The German government is pursuing ambitious plans in the coming years to promote digitalisation and artificial intelligence. A proven expert in these fields such as Irene Bertschek is therefore the right person for this important position.”

Hidden champions are relatively unknown small and medium-sized global market leaders that operate in niche markets. They are among the most successful small and medium-sized enterprises (SMEs) in Germany. One determinant of their success is that they combine innovative technology with tailor-made solutions for their customers. Although hidden champions do not invest more in innovation than firms of a similar size in the same sectors, they achieve greater market success with their innovations.

One reason for this is that hidden champions design their innovation processes to be open without compromising their control over product development. At the same time they invest much more in the skill development of their staff.

Family businesses have a major influence on Germany’s economy. Approximately nine out of ten private companies in Germany were family businesses in 2017. They employ almost 60 per cent of all workers in the private sector. Between 2007 and 2016, the 500 largest family enterprises created more jobs than the DAX companies, making a sustainable contribution to job growth in Germany and worldwide. These are the findings of a recent study on the economic importance of family businesses which is carried out regularly by ZEW and the University of Mannheim’s Institute for SME Research (Institut für Mittelstandsforschung, ifm) on behalf of the Foundation for Family Businesses in Germany and Europe.

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

Luis Cabral, Dominik Schober and Oliver Woll
Search and Equilibrium Prices: Theory and Evidence from Retail Diesel

Philipp Böing and Elisabeth Müller
Measuring China’s Patent Quality: Development and Validation of ISR Indices

Jens Horbach and Christian Rammer
Employment and Performance Effects of Circular Economy Innovations

Melanie Arntz, Sarra Ben Yahmed and Francesco Berlingieri
Working from Home: Heterogeneous Effects on Hours Worked and Wages

Jiansuo Pei, Bodo Sturm and Anqi Yu
Are Exporters More Environmentally Friendly? A Re-Appraisal that Uses China’s Micro-Data

Martin Larch, Alessandro Cugnasca, Diederik Kumps and Eloise Orseau
Fiscal Policy and the Assessment of Output Gaps in Real Time: An Exercise in Risk Management

This issue contains Focus on Europe with the following articles:

Wolfgang Habla, Vera Huwe and Martin Kesternich
Plädoyer für eine evidenzbasierte Politik in der Debatte um Grenzwerte und Tempolimits (Plea for Evidence-Based Policy in the Debate on Threshold Values and Speed Limits)

Katharina Warta, Tobias Dudenbostel, Helmut Gassler, Christian Rammer and Mila Köhler
Evaluierung der Frontrunner-Initiative (Evaluation of the Frontrunner Initiative)

Analysis of Chinese Foreign Direct Investment in Germany and the EU, and Vice Versa

Coming to Terms with Ambiguous Asset Dimensions: Quality, Beauty and Uniqueness in the Built Environment

High-Growth Enterprises and Productivity: Country Report Germany 2019

Innovation Report North Rhine-Westfalia

Identifying Interdisciplinary Topics in Projects of the BMBF Direct Project Funding Schemes

Innovation Activities of Firms in East Germany

SEEK Project 2019: Cross and Common Ownership of Firms and Their Effect on Competition and Innovation

SEEK Project 2019: Innovation and Knowledge Transfer by Firms in Biotechnology Clusters in Germany

The Impacts of Environmental Regulation on Innovation and Firm Performance in Europe

Speaker: Victoria Prowse (Purdue University, USA)
Location of the event: ZEW, Mannheim

Speaker: Stephen D. Comello (Stanford Graduate School of Business, USA)
Location of the event: ZEW, Mannheim

Speaker: Martin Brown (Univeristy of St. Gallen, Switzerland)
Location of the event: ZEW, Mannheim

Speaker: Nora Strecker (Eidgenössische Technische Hochschule (ETH) Zurich, Switzerland)
Location of the event: ZEW, Mannheim

Speaker: Malte Faber (Heidelberg University) and Marc Frick (Heidelberg University)
Location of the event: Forschungszentrum für Umweltökonomik (FZU), Heidelberg

Location of the event: ZEW, Mannheim

Location of the event: Aix-Marseille School of Economics, France

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Speakers: Annika Havlik (ZEW), Prof. Dr. Friedrich Heinemann (ZEW), Dr. Mateusz Szczurek (Lead Regional Economist of the European Bank for Reconstruction and Development (ERBD), former Polish Minster for Finance and member of the European Fiscal Board), Istvan Székely, PhD (Advisor to the Commission’s DG ECFIN), Dr. Eva Zamrazilová (Chairwoman of the Czech Fiscal Council)
Location of the event: Representation of the State of Baden-Württemberg to the European Union, Brussels, Belgium

Academic Assistant to the Head of the Research Department "Digital Economy"

Researchers (PhD students; 100%) for all research departments

Picture Credits: news article of 24 May 2019: iStock.com/JeanPavonePhoto, press release of 20 May 2019: iStock.com/Alija, news article of 17 May 2019: Erich Dichiser EDM, press release of 16 May 2019: iStock.com/Ilja Hendel/WiD, press release of 13 May 2019: iStock.com/primeimages, press release of 08 May 2019: iStock.com/RossHelen, press release of 06 May 2019: iStock.com/Georgijevic, press release of 02 May 2019: Anna Logue, press release of 30 April 2019: iStock.com/PeopleImages, press release of 29 April 2019: iStock.com/YuriArcurs
 
 
All further pictures: ©ZEW