Newsletter July 2019

A group of economists from ZEW’s “Environmental and Resource Economics, Environmental Management” Research Department travelled to Venice from 30 June to 6 July 2019 to attend this year’s summer school of the European Association of Environmental and Resource Economists (EAERE) on “Econometric Approaches for Environmental Policy Evaluation”.

On 23 July 2019, the former long-standing Director of Businesses of Administration of ZEW, Ernst-O. Schulze, celebrated his 80th birthday. The employees of ZEW would like to offer their congratulations on this special occasion. On behalf of the Board of Directors, the current ZEW Director and successor to Schulze, Thomas Kohl, acknowledges the contributions of his predecessor.

From 26–29 June 2019, eight doctoral and post-doctoral researchers from ZEW’s Research Department “Environmental and Resource Economics, Environmental Management“ were in Manchester at this year’s conference of EAERE, the European Association of Environmental and Resource Economists. The ZEW researchers presented on-going or published work, amongst others, on the German electricity distribution sector and environmental clauses in international trade agreements. Furthermore, they organized a policy session on the role of non-state actors in climate policy.

On 11 July 2019, the exhibition ship MS Wissenschaft anchored in Bonn on the Stresemannufer in the context of the Science Year 2019. In the early evening, visitors were invited to take a tour of the exhibition on the topic of artificial intelligence. ZEW digital economist Janna Axenbeck was also on board presenting the touch-screen exhibit “Wie Künstliche Intelligenz Sprache und die Welt verstehen lernt” (How Artificial Intelligence Learns to Understand Language and the World) during a “Meet the Scientist” event.

At a kick-off workshop on 9 May 2019, project partners of ZEW, the University of Mannheim and the Institute for Employment Research (IAB), joined by a stakeholder advisory board consisting of representatives from the government and the German industry, came together to discuss the objectives of a new research project on climate policy. The project “Evaluating Policy Instruments for the Transformation to a Low Carbon Economy: Causal Evidence from Administrative Micro Data” (TRACE) investigates the impact of climate policy regulations on the competitiveness, energy consumption and employment of the German industry.

TRACE is funded by the Federal Ministry of Education and Research through its funding priority “Economics of Climate Change”.

Whether it is the cloud that stores data, a software that manages production processes, or an online platform that allows us to book an accommodation, listen to music or that delivers products directly to us – digitalisation is everywhere. We at ZEW are closely following this development. On our new theme page, we have compiled information about the digitalisation of the economy. The page summarises our central research findings and gives an overview of our key research areas:
 
• Digital Technologies and Their Use in the Economy
• Digital World of Work
• Data and Platform Economy
 
In addition, the theme page offers insights into current issues, publications and events in the area of digitalisation.
 

Search engines, social networks, comparison and rating portals, and other digital platforms are increasingly transforming our lives. They make intensive use of algorithmic decision-making, especially of machine learning. Those markets in which digital platforms occur as intermediaries or market participants are also increasingly influenced by algorithms and machine learning applications. Dr. Dominik Rehse, head of the Junior Research Group “Digital Market Design” in the ZEW Research Department “Digital Economy” explains the implications of this transformation.

This summer, the German cabinet will propose its new National Industry Strategy 2030. Federal Minister of Economic Affairs Altmaier has placed great emphasis on the industrial strategy and elicited a great deal of controversy. While the proposed instruments and one-sided attention to industry and large firms has drawn some criticism, underlying justification for the industrial strategy has received less attention: How should Europe, with its market-based orientation, position itself against state capitalism in China, marked by a large proportion of state-owned enterprises and a high density of government control of the private economy?

In trying to wrestle with this question, it makes sense to divide the discussion into three strands.

Gabriele Rovigatti, PhD, was a visiting researcher in ZEW’s Research Department “Corporate Taxation and Public Finance” from 22 to 23 July 2019. He is a research fellow at the Bank of Italy. His research focuses on applied industrial organisation, public procurement and structural productivity estimation. During his visit, he worked with ZEW researcher Leonardo Maria Giuffrida, PhD, on a project concerning the relation between government spending and firm-level productivity.

Professor Jeffrey Cohen was a visiting researcher in ZEW’s Research Department “International Finance and Financial Markets” from 9 to 19 July 2019. He is an associate professor at the School of Business at the University of Connecticut, USA. His research focuses on real estate economics, housing prices and spatial econometrics. During his visit, he worked with ZEW researcher Dr. Carolin Schmidt on a new joint research project, which deals with the question of whether a collapse of the infrastructure in Germany leads to a relocation of companies and thus affects rent prices of commercially used real estate. In a ZEW Research Seminar, Jeffrey Cohen presented his results on the impact of the continuation of air services in Berlin-Tegel on housing prices, due to the delayed opening of the airport Berlin-Brandenburg.

Assistant Professor Dirk Foremny was a visiting researcher in ZEW’s Department “Corporate Taxation and Public Finance” from 15 to 17 July 2019. He is an assistant professor at the Universidad de Barcelona School of Economics in Spain. Furthermore, he is affiliated with the Institut d’Economia de Barcelona (I.E.B.), Spain, and the CESifo in Munich. His research focuses on public economics. His current work concentrates mainly on applied work in public finance.

Tomorrow marks the beginning of the Federal Constitutional Court’s two-day hearing on the Public Sector Purchase Programme (PSPP) of the European Central Bank (ECB). The Karlsruhe-based court had already dealt with constitutional complaints against the programme in 2017, referring several questions to the European Court of Justice (ECJ) for a preliminary ruling. After the ECJ decided these issues in favour of the ECB in its December 2018 ruling, the Federal Constitutional Court is now continuing its proceedings. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” at ZEW, comments on this matter.

At its meeting today, the Governing Council of the European Central Bank (ECB) refrained from an immediate cut in interest rates. At the same time, it has decided to review all options for a further easing of monetary policy, including new bond purchases. Professor Friedrich Heinemann, head of the “Corporate Taxation and Public Finance” Research Department at ZEW, discusses this matter.

The British Conservative Party elected Boris Johnson as its new leader. He will soon also take over the office of British Prime Minister. The President of ZEW, Professor Achim Wambach, sums up this matter.
 

In the most recent survey for July (3–18 July 2019), the expectations regarding the Chinese economy have increased by 7.7 points. With a current reading of minus 0.1 points (June 2019: minus 7.8 points), the CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, remains, however, in negative territory. The CEP indicator has been below its long-term average of 1.6 points since March 2018 and has been experiencing an almost uninterrupted series of negative readings since April 2018.

ZEW has presented the Heinz König Young Scholar Award for the 21st time. This year, the research award went to Christian Ochsner from CERGE-EI in Prague and the University of Zurich and Felix Roesel from the ifo Institute in Dresden. The young researchers were awarded the prize by ZEW for their research on populism. With their study, Ochsner and Roesel contribute towards creating a better understanding of the mechanisms that can lead to the success of populist communication.

The ZEW Indicator of Economic Sentiment for Germany decreased slightly in July 2019. Expectations are now at minus 24.5 points. This corresponds to a drop of 3.4 points compared to the previous month. The indicator’s long-term average is 21.8 points. In July, the assessment of the economic situation in Germany worsened by 8.9 points, with the corresponding indicator falling to a current reading of minus 1.1 points.

Country-by-Country Reporting (CbCR) appears to effectively curb aggressive tax avoidance of multinational corporations and leads to a significant decrease in tax haven operations. The main beneficiaries of this development, however, are European low-tax countries, to which Germany does not belong. It is mainly these low-tax countries that attract real investment from multinationals following the CbCR mandate. These are the findings of empirical studies by ZEW, the University of Mannheim and Stanford University.
 

Christine Lagarde was nominated to become the new President of the European Central Bank (ECB). This was agreed by the heads of state and government of the European Union, as Council President Donald Tusk announced yesterday. Bundesbank president Jens Weidmann had also been repeatedly considered as Mario Draghi’s successor. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporation Taxation and Public Finance”, comments on the upcoming change in presidency at the ECB.

In the 2018 business year, ZEW continued its strategic expansion into a competence centre for market and institutional design, which had already begun in 2017. The ZEW Annual Report 2018, which this year is published in a completely new and modern design that includes infographics and a focus on digitisation, provides information on the steps taken to achieve this strategic expansion.

Reverse mortgages, which can be used to borrow on debt-free real estate in old age to improve one’s pension, have not yet become established in Germany – unlike in the USA and Great Britain. Also for the future, financial market experts expect reverse mortgages to increase only slightly in importance as an instrument for old-age provision in Germany. The high emotional value of the property is what mainly inhibits the demand for reverse mortgages. For mortgage providers, by contrast, the primary obstacle is the difficulty of estimating the lifespan of property owners.

These are the key results of the analysis of the special question in the monthly ZEW Financial Market Survey, which was carried out by ZEW in July 2019.

Although digitalisation and automation will lead to moderate employment growth in Germany until 2021, they are also likely to increase income inequality among employees. Contrary to widespread public perception, technological change creates more jobs than it destroys. What is of central importance, however, is not so much the number of jobs affected as the structural change in the labour market, which is taking place as digitalisation and automation progresses. Policymakers can counter this development by making it easier for companies to provide employees with appropriate training and further education.

Two high school teams mentored by ZEW have won the regional preliminary round of the nationwide high school economic competition YES! – Young Economic Summit and will compete in the grand final in Hamburg in September 2019. The Werner-Heisenberg-Gymnasium from Weinheim and the Engelsburg-Gymnasium from Kassel impressed with their ideas at the regional final at ZEW.
 

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

Lisa De Simone, Marcel Olbert and Christoph Spengel
Is Mandatory Country-by-Country Reporting Effective? – Early Evidence on the Economic Responses by Multinational Firms

Michael Kolb, Guido Neidhöfer and Friedhelm Pfeiffer
Intergenerational Mobility and Self-Selection of Asylum Seekers in Germany

Wolfgang Briglauer, Niklas Dürr and Klaus Peter Gugler
A Retrospective Study on the Regional Benefits and Spillover Effects of High-Speed Broadband Networks: Evidence from German Counties

Zareh Asatryan, Annika Havlik, Friedrich Heinemann and Justus Nover
Biases in Fiscal Multiplier Estimates

Melanie Arntz, Terry Gregory and Ulrich Zierahn
Digitalisation and the Future of Work: Macroeconomic Consequences

This issue contains a Focus on Market Design with the following articles:

Annette Hillerich-Sigg and Susanne Steffes
Chancengleichheit am Arbeitsplatz (Equal Opportunities in the Workplace)

Sandra Gottschalk and Moritz Lubczyk
Gründungen in Baden-Württemberg (Company Start-Ups in Baden-Württemberg)

Tobias Haepp, Michael F. Maier and Susanne Steffes
Technologischer Wandel in deutschen Betrieben: Treiber, Hürden und Konsequenzen für das Personalmanagement (Technological Change in German Companies: Drivers, Hurdles and Consequences for Personnel Management)

College Openings and Local Economic Development

Business and Economic Research Data Center (BERD-Center)

Distortive Effects of Tax Loss Restrictions on Venture Capital Funding of Start-Ups

Measurement of the Digitalisation of the German Economy

SEEK Project 2019: Social Mobility and Economic Performance

Social and Regional Importance of Public Services and the Provision of Infrastructure

Speaker: Toshi Arimura (Waseda University, Japan)
Location of the event: ZEW, Mannheim

Location of the event: ZEW, Mannheim

Podium: Heike Göbel (Moderation), Professor Dr. Friedrich Heinemann (ZEW), Professor Dr. Thomas König (Professor of Political Science at the University of Mannheim), Joachim Menze (Head of the European Commission Regional Office in Munich), Guido Wolf (Baden-Württemberg Minister of Justice and European Affairs)
Location of the event: ZEW, Mannheim

Academic Assistant (f/m/d) to the Head of the Research Department “Environmental and Resource Economics, Environmental Management“ in full-time or part-time (50 %)

Picture Credits: press release of 29 July 2019: iStock.com/instamatics, press release of 25 July 2019: Anna Logue Fotografie/ ZEW, news article of 23 July 2019: CMCC/Martina Gambaro, press release of 23 July 2019: iStock.com/George Clerk, press release of 12 July 2019: iStock.com/Viktor_Gladkov, news article of 11 July 2019: Ilja Hendel/WiD, press relase of 03 July 2019: Anna Logue Fotografie/ ZEW, news article of 02 July 2019: Anna Logue Fotografie/ ZEW, press release of 01 July 2019: Erich Dichiser/ZEW, press release of 01 July 2019: iStock.com/Bestgreenscreen, news article of 28 June 2019: Anna Logue Fotografie/ ZEW, press release of 28 June 2019: iStock.com/Just_Super, press relase of 28 June 2019: YES! – Young Economic Summit
 
All further pictures: ©ZEW